Pricing a Future

There are a lot of variables to consider when we are talking about pricing a forward/future. For now, we'll simplify the problem and focus on the few key variables: the risk-free interest rate, the time until delivery date, and the underlying price. Since in a forward/future contract, we…

Budapest, Hungary

My wife and I spent a few days in Budapest this past month. I wasn't quite sure what to expect from Hungary but by the end Quick History of Hungary Hungarians were nomads from the eastern part of the Ural Mountains (deep in current day Russia) who settled on the…

Forwards and Futures

In the past few months, we've talked about fundamental vocabulary, the idea of trading, making markets, retreating, and the different markets that exist. With the fundamentals of trading out of the way, let's dig into some of the slightly more complicated concepts: forwards and futures. A forward contract (or simply…

Securities Exchanges Regulations

With the recent rise of popularity in investing in cryptocurrency, I wanted to write a post about the dangers the lack of regulations in an exchange. While we are seeing a move by the world governments to start to identify crypto-trading as an investment (thereby demanding folks pay a capital…

In the Pit. On the Screen.

On the exchanges where I traded, there are mainly two types of trading. One takes place on the floor (in the pit, downstairs, open outcry, etc.) and another takes place on the screens (electronic trading, upstairs, etc.). In the Pit Let's start with trading "in the pit" (officially…

Sound the Retreat

Continuing from the previous post about market makers, let's look at an example. Let's set the scenario. Let's say this mystery contract ticks in nickels (0.05) and I always want an edge of 0.12. Also, I am willing to do 10 lots (contracts) at a time. Finally, our…

Bitcoin Futures Explained

On Dec 9, 2017 CBOE got into the bitcoin world by opening up a market on Bitcoin Futures. CME also plans to get into the cryptocurrency world by also offering futures on Bitcoins. There are a handful of subtle differences between these contracts. As an exercise to better understand the…