Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
If you want to trade, a margin is necessary. For example, if you wish to buy/sell 1 contract of CL an initial deposit of $ 5,610 (performance bonds) is required.
You cannot trade without margin, and therefore an infinite number of contracts requires an infinite amount of money.
Well I guess in the strict sense of "infinite," then nothing man-made is infinite, as there aren't "infinite" number of people in existence. But, as the OP asks, "Is there an infinite number of contracts per futures instrument," what I'm saying is that all that is required is a buyer and a seller...... to which the answer is: As many buyers as sellers.
This is one of those semantical discussions that often occur on trading forums, such as whether or not one is actually predicting vs. reacting, or buy low sell high.
I think the OP was asking if there are a set number of contracts that can be traded? As in does the S&P allow more than 10 million contracts to be traded on a given day for example. And my answer is: As long as there exists a buyer and a seller willing to transact at a given price, then they can trade.
So two people could sit at the same two prices and trade a million contracts at all day if they desired.
The next day, two different people could sit on those same two prices and trade 100 million lots there if they wanted. There is no SET amount. If an INFINITE amount of aliens from every corner of the galaxy all of a sudden decided they wanted to trade the S&P, they could, as all that is required is a buyer and a seller.
OBVIOUSLY they would need proper margin to place a trade. And they would also need a broker, computer, etc.
That's not what the OP is asking. He is asking, "are futures like stocks, in that there are a finite number of shares available for the public to purchase?" and Fat Tails has correctly answered, "no." There are an infinite number of contracts which can be floated, and what is required is margin. Contracts are "written," unlike shares, which are "issued."
I'm sorry to resurrect this thread, but I have been studying Peter Davies course on orderflow, which also supports the idea of infinite potential futures contracts in my understanding, with liquidity being the key rather then supply and demand. The question I have which I joined this forum to ask (after lurking for months) is if there is no scarcity in futures unlike stocks, does this mean trading philosophies based on supply and demand are invalid in futures? In particular is the Wyckoff methodology and theory invalid in this environment? I cannot tell if Wyckoff theory presents the macroscopic picture of action on the DOM and T&S or if those that trade futures successfully with it are just succeeding through intuition and rationalizing through a flawed belief system like the followers of Elliot Waves or Gann astrological methods.
Wyckoff to me makes sense with finite trading instruments but I dont want to waste years of my on this philosophy if it does not pertain to futures, which is all I plan on trading.
regards to all, love this forum its a goldmine compared to others
Both futures and option trades are basically contracts that are created between 2 parties, thus they are not limited in numbers as long as there are people willing to buy (and sell) them. When there are more buyers than sellers of existing contracts then a new contract is created.
Using an analogy it is like asking: Are prenuptial agreements limited in numbers?* or Are life insurances limited in numbers?
*this is of course limited but you get the point, I hope
Equal amount of buyers and sellers at any given time. Just more aggressive buyers or sellers (willing to lift the offer or step down to the bid) to which cause prices to tick up or down.