Futures Quotes: An Introduction
Futures contracts obligate buyers to purchase and sellers to sell an asset at a predetermined future date and price. For example, a farmer might sell corn futures in order to lock-in a price for his or her crop and a trader might buy those contracts in order to speculate on a rise in corn prices without buying large amounts of corn, which would require storage and a host of other upfront capital costs.
In this article, we’ll take a look at where traders can find futures quotes, how to read the quotes, and some other information that traders may find valuable.
Finding Futures Quotes
Futures are traded on a number of different exchanges in the U.S. and around the world, including the New York Mercantile Exchange (“NYMEX”) for energy, the Chicago Mercantile Exchange (“CME”) for metals, and the Chicago Board of Trade (“CBOT”) for grains. Futures quotes from these exchanges are available on a number of different financial websites and futures brokerage platforms.
Some popular financial websites for futures quotes include:
- Finviz – Provides current, open, high, low, and close data for all major futures contracts, as well as relative performance measurements and charts showing pricing trends over a longer period of time.
- TradingCharts – Provides comprehensive futures quotes broken down by contract months with volumes, option interests, and last-trade data for more granular insights than other sources.
- CME Group – Provides futures quotes for all of the contracts trading on its exchange and others, while also permitting downloadable data formats that can be useful for automated analysis in Microsoft Excel.
In general, futures traders should look to their brokerage platforms as a primary source of quotations since they usually provide greater depth of data. Platforms like Finviz, TradingCharts, and CME Group can provide ancillary data, such as options contracts on those futures and relative performance comparisons to quickly identify what commodity groups are performing the best over a period of time.
Reading Futures Quotes
Futures quotes, like the one in Figure 1 below, are similar to equity and options quotes in that they contain the current price, OHLC prices, and volume. But in addition to these metrics, futures quotes also contain unique elements like settlement dates, lifetime highs, and lifetime lows, although the way that futures quotes are reported often differ between service providers.
Here’s a breakdown of the uncommon elements in Figure 1 above:
- Month – Futures contracts are classified by their delivery month, which simply represents the month that physical deliver occurs. While most traders never take physical delivery of commodity futures, the months are important to consider since they impact volatility and valuation.
- Settlement – Futures trading is often busiest in the last few minutes of the day with many trades occurring simultaneously, so exchanges compute the settlement price based on these figures. Clearing houses use the settlement price to calculate the market value of outstanding positions. Notably, the settlement price can differ from the closing price in some cases.
- Lifetime – Futures contracts have a limited life, unlike equities, which makes their lifetime highs and lows important to consider. These values are simply the highest and lowest prices recorded for each contract maturity from the first day that it traded until the present day and time.
- Open Interest – Open interest is similar to shares outstanding in a traditional equity in that it signifies the number of contracts outstanding. These metrics are important when considering the futures contract’s liquidity, particularly if the trader doesn’t plan on holding the contract to near expiration.
Of course, futures quotes will also differ significantly depending on the type of futures market in question. Financial futures, such as currencies, as well as stock index futures will look very different than commodity futures like the quote above. These futures quotes will have fewer moving parts in many cases, since they might not involve complex settlements or relevant open interest measurements.
Futures Quote Abnormalities
Futures prices themselves are typically governed by arbitrage methodologies, since the forward price represents the expected future value discounted at the risk-free rate in markets with ample supply. Of course, some commodity markets have limited supply, which means they are more driven by supply versus demand and have greater volatility than would otherwise be expected.
In some cases, far futures quotes can be higher or lower than the nearer future quotes in what’s known as contango or backwardation (Figure 3). In cases of contango, when the futures quote is higher than the spot price, buyers are willing to pay more for a commodity at some point in the future than the actual expected price due to the carry or storage costs exceeding the value of owning the asset itself.
These dynamics can make the futures markets a bit more complex than equity or even options markets. While futures quotes may not make sense on the surface, the dynamics often become apparent when taking a closer look at the market’s dynamics. For example, corn prices that are expected to fall due to new government regulations could make futures prices trade well below their spot price.
The Bottom Line
Futures provide traders with a great way to speculate on the future price of a commodity, currency, equity index, or other asset. Traders can find futures quotes in a number of different places, including financial websites and brokerage platforms, although brokerage platforms usually provide the most comprehensive data. Finally, traders should keep in mind the strange dynamics that can occur in futures markets.
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