Thousands of market participants come to futures markets every day to protect their business or invest capital. For everyone else, futures are a major link to the prices and rates we pay for everyday things like gasoline, a mortgage or the food we eat.
Case in point: As crude oil prices continued to fall in Spring 2017 due in large part to a North American supply boom, the effect on consumers was lower gasoline prices throughout the summer. Futures markets play into this relationship through the price discovery process. Market participants bought and sold crude oil futures contracts in response to the higher supply (and to supply cuts from OPEC) to protect their business against rising or falling prices, or to speculate about where the market was headed.
Futures Fundamentals
For those who don’t follow markets, they can be difficult to understand. The process can be confusing and the terminology dizzying. A new website focused on educating those new to futures markets helps learners of all levels grasp the concepts essential to the marketplace.
"We need to not only educate people about the markets today and how they play a crucial role in the global economy, but also to get this information direct into classrooms so we might prepare the futures market leaders of tomorrow," says Walt Lukken, President and CEO of the Futures Industry Association (FIA).
At the FIA's annual gathering in Chicago in October 2017, Lukken announced the launch of the site, Futures Fundamentals, in coordination with the National Futures Association, the Institute for Financial Markets, the CME Group Foundation and CME Group. Futures Fundamentals aims at connecting the role of derivatives markets to the things people do every day. The site offers a breakdown of the marketplace that is accessible to anyone, from experienced traders to market newbies -- filling what Lukken calls "an education gap."
Among its interactive features, the site offers a trading tutorial and simulator that lets visitors apply the website’s lessons and practice making electronic trades. The simulator tracks real markets, and provides near real-time updates on a simulated balance. If you’ve never traded before, it is a good introduction to testing your skills before trying the real thing.
The lessons on the site are broken into four sections that feature the role of derivatives as told through stories, interactive infographics, videos and quizzes.
For Educators
In addition to reaching people curious about learning futures, Futures Fundamentals features a section for the classroom that provides a collection of articles, educational videos, interactive quizzes and challenges to help teachers adapt the site to finance or economics curriculum. The section features several learning modules called Econ Essentials, developed in partnership with Discovery Education. Teachers across the U.S. have already put these modules to work.
We interviewed a Chicago teacher whose students are learning economics using Econ Essentials. You can also read guest articles from teachers using the program in South Carolina and Massachusetts.
Get The Basics
The Get the Basics section serves as the introduction unit that provides the user with an overview of the global derivatives marketplace, futures and options, microeconomics and how futures trading affects the public on a daily basis. Videos on futures and options and supply and demand provide you with the necessary knowledge and tools for the site’s second section.
See the Impact
This section dives into an explanation of how familiar tasks like buying food or gas, or obtaining a mortgage, are affected by futures markets. The section also provides a brief introduction of hedging and speculating.
Explore the Marketplace
The final section of Futures Fundamentals combines the knowledge gained from its previous sections and applies it directly to the marketplace. “Explore the Marketplace” provides the user with the necessary information needed to make an actual trade, followed by an overview of algorithms, clearing and over-the-counter trading.
A cruise through the site reveals that it is, as Lukken says, a place to educate "learners of all levels."
OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance and economics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.
All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).
