Risk Management

Risk Management - Market Makers

• ÿþChicago Mercantile Exchange (CME)
• Market Makers
• Intercontinental Exchange (ICE)

Trading futures contracts can be a lucrative and exciting endeavor, but it is important to understand the different strategies used when doing so. A futures contract is an agreement to buy or sell a commodity at a predetermined price on a certain date in the future. Traders use various strategies to maximize their profits while minimizing their risks. One of the most popular strategies is hedging, which involves taking an offsetting position in order to reduce risk. For example, if a trader owns a long position in wheat, they may take a short position in corn as protection against any losses from the wheat trade. Other common strategies include scalping, which involves taking small profits from frequent trades; spreading, where traders make simultaneous buys and sells of different options or assets; and trend-following, which attempts to capitalize on market trends. Finally, arbitrage is another strategy wherein traders exploit price discrepancies between two markets for potential profit. When trading futures contracts it is important to be familiar with these various approaches and choose one that best suits your trading style and goals.