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Our Futures and Commodities License course is created for self study, and carries the highest success pass rate. The Series 3 course starts from the beginning and goes topic by topic in order, so there is no prior experience required. The prep training material includes accurate practice test questions following each section. American Investment Training provides a data bank of hundreds of practice Series 3 Test questions with detailed answers that you learn from.

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Spot Price Explained - Spot Price Commodities

Spot price is the price you would have to shell out at this moment to buy the commodity. Therefore, spot price is in essence the 'right now'. Spot price is affected by the market trends and does not operate in isolation. The future spot price strongly affects a non perishable commodity such as silver. An increase in spot price does not necessarily indicate a high demand of silver. The silver spot price may be high as the traders are expecting a rise in the future. The predictions or the sentiments of the traders in such cases is a strong indicator of what to expect in the silver market.

The future price is as important as the current price in the commodity market. Speculation plays an important role in this market. This importance exists as it gives suppliers and purchasers a hedge against future changes on silver prices. The prices on silver are decided beforehand, even before the silver is bought. This is called a commodity contract. A silver commodity contract is an agreement to buy a specific amount of silver at a decided price at a particular time. The silver price decided in the contract remains binding regardless of it rising or falling in the meantime.

The main advantage for suppliers is that they are guaranteed a customer for their commodity at a certain price even though the of the commodity may rise or fall in the future. The supplier is certain of a sale in this instance. The buyer on the other hand is hoping that the commodity price will rise. The buyer will be able to purchase at a low price and later sell it at the current high price. He will then be able to pocket the difference from the contractual price and the real.

The actual situation is somewhat more complex than this. In reality the investor never really buys the contract but actually sells it to a third party. The third party wants the contract before it matures. There is also the 'put' option, which is actually a form of selling short. It means selling a contract before you actually own it on the assumption that the price will fall. In this way you will be able to buy the contract at a lower price and pocket the difference between the price you sold it at before owning and the actual price you were able to buy it for.

The author is a knowledgeable journalist in silver market, mining & stocks, who periodically writes articles related to silver prices, silver spot price including tips on investment in silver. Please visit silverprices.com for more details.

Futures Contract Basics - Defining the Futures Contract and Structure

A futures contract is a standardized contract to buy or sell a certain commodity called the underlying. This can be an equity or loan instrument or any commodity such as pork, gold etc. Yes the contract is standardized and the date that the purchase or sale is made is an element in this standardized contract. One can say that in some way the terms of the contract are already written down and agreed. You are buying into this 'agreed' contract but paradoxically you are may be buying into a contract to sell something. Yes this is what a futures contract is.

Futures contracts are standardized to the extent that the contracts can be traded. And more than! These contracts must be able to be traded for they are traded in a marketplace called a futures exchange. Thus they are not at all customized deals; It is interesting indeed to ask if you can make something customized out of something standardized; Yes this is a question that can be asked about futures. However when you customize these contracts, you lose the essential element of the futures contract which is the marking-to-market. This concept is explained below.

Thus this standardized contract, which is the futures contract, is about buying or selling a certain commodity or instrument whether specifically financial or otherwise; And the underlying instrument can be anything! It could be another contract e.g. an options contract; It could be an equity instrument or a sophisticated derivative contract. The futures contract too has a value or price and it is traded on the futures exchange. You want to buy or sell something, and then you buy the contract to do this; The futures contract is like a contract to engage in a contract. You are buying the right to engage in that contract and this contract has to be fulfilled.

The buyer of the futures contract must buy or sell the underlying at a certain date in the future; This date is important and it is at the heart of what a future is; Indeed 'the element of time' creates an important variable which is at the heart of financial instruments such as the futures contract.

In the futures contract, you could say that here are two prices. There is the price of the contract itself which you have bought. For the futures contract has a value. Then there is another price which is the price of the commodity which is to be bought or sold. Thus the price of the futures contract itself is a commodity that is traded daily and the price or value changes daily. This is called 'marking- to -market'. And note the differential between the value of the futures contract and the settlement price at that future time. It is this differential that is produced between the two prices or values that must be paid to the other side of the party or else credited to your own account in the market. For remember that futures are traded on a market called the futures exchange.

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What Causes Volatility in the Pakistan Stock Market

By Ghazi Naseem

For a long time, Pakistan's Stock Market was performing exceptionally well. Over the years of continued stable political and improved security indicator further strengthened the economic activity in the country. All of a sudden, political turmoil gripped the country in wake of Panama Leaks accusing head of the ruling party.

Here are the reasons why the Pakistan stock market has been experiencing major volatility.

Political ripple effect:

Pakistan's largest party and PM accused in Panama Gates and ousted after marathon hearings in the country's highest court. As a result, PSX - biggest stock market of Pakistan invariably had a ripple effect all over. When the KSE100 index fell after marking historic high of around 53,000 slipped more than 30% despite venturing into MSCI regime.

Risk of fiscal gaffe:

Persistent rise in the current account deficit due to a higher trade gap led by a significant increase in imports as compared to exports. Pakistan's trade deficit rose 24.18% to over $9.2 billion in the first seven months of the current fiscal, while foreign currency reserves were declining at a rapid pace. The markets are worried the way the local Rupee devolution in recent past, higher trade deficit may pose extra pressure on Pak Rupee.

The total liquid foreign reserves held by the country stood at $18.413 billion on end of February, 2018 including $12.34 held by the SBP and remaining $6.067 billion by the commercial banks.

Foreign Remittances:

According to figures released by the State Bank of Pakistan for the period July-Feb increased by 3.41% to $12,833.64 Million compared to $12,410.54 Million for the corresponding period from last year.

Foreign direct investment (FDI) remained dried up in the seven months of FY18, as FDI inflows came to $1.487 billion during July-January FY18, compared with $1.532 billion a year ago.

Recuperating Exports:

The exports achieving the highest monthly growth yet in the fiscal year by posting 16% increase in dollar terms exports in February 2017. However the current year's export has already contributed additional inflows of around USD 1.5 bn during the first eight months and is expected to reach the figure of additional USD 2.5 bn, during 2017-18. This increase in economic activity in external sector reflects an increase of 0.8% of GDP.

Keep Check on Macroeconomic trends:

Economic manager needs to keep CHECK on current macroeconomic trends to sustain the achieved growth and huge catch up in the financial years ahead provided with controlled and fiscal discipline. Here are the encouraging signs to buildup.

Timely completion of Energy Projects and low output cost would bring down cost of production.

Inflation Rate around 4%.

CPEC projects on track.

Senate Elections clearing the political vague.

Attractive Valuations.

Potential growth in FDI's.

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Option Contract Trading Basics - Stock Option Risks and Strategies

Before you learn the basics about how to trade options and the strategies, it is important to understand the types, cost and risks before opening an options account for trading. This article will focus on stock options vs. foreign currencies, bonds or other securities you can trade options on. This piece will mostly focus on the buy side on the market and the trading strategies used.

What is a Stock Option

An option is the right to buy or sell a stock at the strike price. Each contract on a stock will have an expiration month, a strike price and a premium - which is the cost to buy or short the option. If the contract is not exercised before the option expires, you will lose your money invested in your trading account from that contract. It is important to learn that these instruments are riskier than owning the stocks themselves, because unlike actual shares of stock, options have a time limit. There are 2 types of contracts. Calls and Puts and How to trade them and the basics behind them.

What is a Call Option and how to trade them?

A call option contract gives the holder the right to buy 100 shares of the stock (per contract) at the fixed strike price, which does not change, regardless of the actual market price of the stock. An example of a call option contract would be:

1 PKT Dec 40 Call with a premium of $500. PKT is the stock you are buying the contract on. 1 means One option contract representing 100 shares of PKT. The basic thought and learning how to trade call options in this example is you are paying $500, which is 100% at risk if you do nothing with the contract before December, but you have the right to buy 100 shares of the stock at 40. So, if PKT shoots up to 60. You can exercise the contract and buy 100 shares of it at 40. If you immediately sell the stock in the open market, you would realize a profit of 20 points or $2000. You did pay a premium of $500, so the total net gain in this options trading example would be $1500. So the bottom line is, you always want the market to rise when you are long or have purchased a call option.

Trading Strategy vs. Exercising and Understanding Premiums

With call options, the premium will rise as the market on the underlying stock rises. Buyer demand will increase. This increase in premiums allows for the investor to trade the option in the market for a profit. So you are not exercising the contract, but trading it back. The difference in the premium you paid and the premium it was sold for, will be your profit. The benefit for people looking to learn how to trade options or learn the basics of a trading strategy is you do not need to buy a stock outright to profit from it's increase with calls.

What are Put Options?

A put option is the reverse of a call contract. Puts allow the owner of the contract to SELL a stock at the strike price. You are bearish on the shares or perhaps the sector that the company is in. Since selling a stock short is extremely risky, since you have to cover that short and your buyback price of that stock is unknown. Bet THAT wrong and you are in a world of trouble. However, put options leave the risk to the cost of the option itself - the premium. Learning or getting information on how to trade Puts starts with the above and looking at an example of a put contract. Using the same contract as above, our anticipation of the market is completely different.

1 PKT Dec 40 Put with a premium of $500. If the stock declines, the trader has a right to sell the stock at 40, regardless of how low the market goes. You are bearish when you buy or are long put options. Learning to trade puts or understanding them starts with market direction and what you have paid for the option. Any basic strategy you take on this contract must be done by December. Options normally expire toward the end of the month.

You have the same 3 trading strategy choices.

Let Option Expire - usually because the market went up and trading them is not worth it, nor is exercising your right to sell it at the strike price.

Exercise the Contract - Market declined, so you buy the stock at the lower price and exercise the contract to sell it at 40 and make your profit.

Trading The Option - The market either declined, which raised the premium or the market rose and you are just looking to get out before losing all of your premium.

Conclusion Basics

Trading Options carries nice leverage because you do not have to buy or short the stock itself, which requires more capital.

They carry 100% risk of premiums invested.

There is an expiration time frame to take action after you buy options.

Trading Options should be done slowly and with stocks you are familiar with.

I hope you learned some of the basics of options buy side trading, investing and how to trade them. Look for more of our articles. American Investment Training.

More on Options and Trading Strategies at American Investment Training 

Nick Hunter is the President of American Investment Training. AIT provides broker and investor education, including Call Options. Visit https://www.americaninvestmenttraining.com/ for their full resources.

Cryptocurrency Article - Cryptocurrency: The Fintech Disruptor

By Riasat Noor

Blockchains, sidechains, mining - terminologies in the clandestine world of cryptocurrency keep piling up by minutes. Although it sounds unreasonable to introduce new financial terms in an already intricate world of finance, cryptocurrencies offer a much-needed solution to one of the biggest annoyances in today's money market - security of transaction in a digital world. Cryptocurrency is a defining and disruptive innovation in the fast-moving world of fin-tech, a pertinent response to the need for a secure medium of exchange in the days of virtual transaction. In a time when deals are merely digits and numbers, cryptocurrency proposes to do exactly that!

In the most rudimentary form of the term, cryptocurrency is a proof-of-concept for alternative virtual currency that promises secured, anonymous transactions through peer-to-peer online mesh networking. The misnomer is more of a property rather than actual currency. Unlike everyday money, cryptocurrency models operate without a central authority, as a decentralized digital mechanism. In a distributed cryptocurrency mechanism, the money is issued, managed and endorsed by the collective community peer network - the continuous activity of which is known as mining on a peer's machine. Successful miners receive coins too in appreciation of their time and resources utilized. Once used, the transaction information is broadcasted to a blockchain in the network under a public-key, preventing each coin from being spent twice from the same user. The blockchain can be thought of as the cashier's register. Coins are secured behind a password-protected digital wallet representing the user.

Supply of coins in the digital currency world is pre-decided, free of manipulation, by any individual, organizations, government entities and financial institutions. The cryptocurrency system is known for its speed, as transaction activities over the digital wallets can materialize funds in a matter of minutes, compared to the traditional banking system. It is also largely irreversible by design, further bolstering the idea of anonymity and eliminating any further chances of tracing the money back to its original owner. Unfortunately, the salient features - speed, security, and anonymity - have also made crypto-coins the mode of transaction for numerous illegal trades.

Just like the money market in the real world, currency rates fluctuate in the digital coin ecosystem. Owing to the finite amount of coins, as demand for currency increases, coins inflate in value. Bitcoin is the largest and most successful cryptocurrency so far, with a market cap of $15.3 Billion, capturing 37.6% of the market and currently priced at $8,997.31. Bitcoin hit the currency market in December, 2017 by being traded at $19,783.21 per coin, before facing the sudden plunge in 2018. The fall is partly due to rise of alternative digital coins such as Ethereum, NPCcoin, Ripple, EOS, Litecoin and MintChip.

Due to hard-coded limits on their supply, cryptocurrencies are considered to follow the same principles of economics as gold - price is determined by the limited supply and the fluctuations of demand. With the constant fluctuations in the exchange rates, their sustainability still remains to be seen. Consequently, the investment in virtual currencies is more speculation at the moment than an everyday money market.

In the wake of industrial revolution, this digital currency is an indispensable part of technological disruption. From the point of a casual observer, this rise may look exciting, threatening and mysterious all at once. While some economist remain skeptical, others see it as a lightning revolution of monetary industry. Conservatively, the digital coins are going to displace roughly quarter of national currencies in the developed countries by 2030. This has already created a new asset class alongside the traditional global economy and a new set of investment vehicle will come from cryptofinance in the next years. Recently, Bitcoin may have taken a dip to give spotlight to other cryptocurrencies. But this does not signal any crash of the cryptocurrency itself. While some financial advisors emphasis over governments' role in cracking down the clandestine world to regulate the central governance mechanism, others insist on continuing the current free-flow. The more popular cryptocurrencies are, the more scrutiny and regulation they attract - a common paradox that bedevils the digital note and erodes the primary objective of its existence. Either way, the lack of intermediaries and oversight is making it remarkably attractive to the investors and causing daily commerce to change drastically. Even the International Monetary Fund (IMF) fears that cryptocurrencies will displace central banks and international banking in the near future. After 2030, regular commerce will be dominated by crypto supply chain which will offer less friction and more economic value between technologically adept buyers and sellers.

If cryptocurrency aspires to become an essential part of the existing financial system, it will have to satisfy very divergent financial, regulatory and societal criteria. It will need to be hacker-proof, consumer friendly, and heavily safeguarded to offer its fundamental benefit to the mainstream monetary system. It should preserve user anonymity without being a channel of money laundering, tax evasion and internet fraud. As these are must-haves for the digital system, it will take few more years to comprehend whether cryptocurrency will be able to compete with the real world currency in full swing. While it is likely to happen, cryptocurrency's success (or lack thereof) of tackling the challenges will determine the fortune of the monetary system in the days ahead.

Delving into the much-talked-about and hard-coded clandestine world of the next monetary system - cryptocurrency. While the digital coin offers immersive prospect and benefit to the potential investors and traders; it is yet to face numerous challenges and devise response mechanism for the future world.

Article Source: http://EzineArticles.com/expert/Riasat_Noor/2492680


SERIES 31 LICENSE TRAINING - Futures Managed Funds Exam

China and Cryptocurrency

In 2008 following the financial crisis, a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System" was published, detailing the concepts of a payment system. Bitcoin was born. Bitcoin gained the attention of the world for its use of blockchain technology and as an alternative to fiat currencies and commodities. Dubbed the next best technology after the internet, blockchain offered solutions to issues we have failed to address, or ignored over the past few decades. I will not delve into the technical aspect of it but here are some articles and videos that I recommend:

How Bitcoin Works Under the Hood

A gentle introduction to blockchain technology

Ever wonder how Bitcoin (and other cryptocurrencies) actually work?

Fast forward to today, 5th February to be exact, authorities in China have just unveiled a new set of regulations to ban cryptocurrency. The Chinese government have already done so last year, but many have circumvented through foreign exchanges. It has now enlisted the almighty 'Great Firewall of China' to block access to foreign exchanges in a bid to stop its citizens from carrying out any cryptocurrency transactions.

To know more about the Chinese government stance, let's backtrack a couple years back to 2013 when Bitcoin was gaining popularity among the Chinese citizens and prices were soaring. Concerned with the price volatility and speculations, the People's Bank of China and five other government ministries published an official notice on December 2013 titled "Notice on Preventing Financial Risk of Bitcoin" (Link is in Mandarin). Several points were highlighted:

1. Due to various factors such as limited supply, anonymity and lack of a centralized issuer, Bitcoin is not a official currency but a virtual commodity that cannot be used in the open market.

2. All banks and financial organizations are not allowed to offer Bitcoin-related financial services or engage in trading activity related to Bitcoin.

3. All companies and websites that offer Bitcoin-related services are to register with the necessary government ministries.

4. Due to the anonymity and cross-border features of Bitcoin, organizations providing Bitcoin-related services ought to implement preventive measures such as KYC to prevent money laundering. Any suspicious activity including fraud, gambling and money laundering should to be reported to the authorities.

5. Organizations providing Bitcoin-related services ought to educate the public about Bitcoin and the technology behind it and not mislead the public with misinformation.

In layman's term, Bitcoin is categorized as a virtual commodity (e.g in-game credits,) that can be bought or sold in its original form and not to be exchanged with fiat currency. It cannot be defined as money- something that serves as a medium of exchange, a unit of accounting, and a store of value.

Despite the notice being dated in 2013, it is still relevant with regards to the Chinese government stance on Bitcoin and as mentioned, there is no indication of the banning Bitcoin and cryptocurrency. Rather, regulation and education about Bitcoin and blockchain will play a role in the Chinese crypto-market.

A similar notice was issued on Jan 2017, again emphasizing that Bitcoin is a virtual commodity and not a currency. In September 2017, the boom of initial coin offerings (ICOs) led to the publishing of a separate notice titled "Notice on Preventing Financial Risk of Issued Tokens". Soon after, ICOs were banned and Chinese exchanges were investigated and eventually closed. (Hindsight is 20/20, they have made the right decision to ban ICOs and stop senseless gambling). Another blow was dealt to China's cryptocurrency community in January 2018 when mining operations faced serious crackdowns, citing excessive electricity consumption.

While there is no official explanation on the crackdown of cryptocurrencies, capital controls, illegal activities and protection of its citizens from financial risk are some of the main reasons cited by experts. Indeed, Chinese regulators have implemented stricter controls such as overseas withdrawal cap and regulating foreign direct investment to limit capital outflow and ensure domestic investments. The anonymity and ease of cross-border transactions have also made cryptocurrency a favorite means for money laundering and fraudulent activities.

Since 2011, China has played a crucial role in the meteoric rise and fall of Bitcoin. At its peak, China accounted for over 95% of the global Bitcoin trading volume and three quarters of the mining operations. With regulators stepping in to control trading and mining operations, China's dominance has shrunk significantly in exchange for stability.

With countries like Korea and India following suit in the crackdown, a shadow is now casted over the future of cryptocurrency. (I shall reiterate my point here: countries are regulating cryptocurrency, not banning it). Without a doubt, we will see more nations join in in the coming months to rein in the tumultuous crypto-market. Indeed, some kind of order was long overdue. Over the past year, cryptocurrencies are experiencing price volatility unheard of and ICOs are happening literally every other day. In 2017, the total market capitalization rose from 18 billion USD in January to an all-time high of 828 billion USD.

Nonetheless, the Chinese community are in surprisingly good spirits despite crackdowns. Online and offline communities are flourishing (I personally have attended quite a few events and visited some of the firms) and blockchain startups are sprouting all over China.

Major blockchain firms such as NEO, QTUM and VeChain are getting huge attention in the country. Startups like Nebulas, High Performance Blockchain (HPB) and Bibox are also gaining a fair amount of traction. Even giants such as Alibaba and Tencent are also exploring the capabilities of blockchain to enhance their platform. The list goes on and on but you get me; it's going to be HUGGEE!

The Chinese government have also been embracing blockchain technology and have stepped up efforts in recent years to support the creation of a blockchain ecosystem.

In China's 13th Five-Year Plan (2016-2020), it called for the development of promising technologies including blockchain and artificial intelligence. It also plans to strengthen research on the application of fintech in regulation, cloud computing and big data. Even the People's Bank of China is also testing a prototype blockchain-based digital currency; however, with it likely to be a centralized digital currency slapped with some encryption technology, its adoption by the Chinese citizens remains to be seen.

The launch of the Trusted Blockchain Open Lab as well as the China Blockchain Technology and Industry Development Forum by the Ministry of Industry and Information Technology are some of the other initiatives by the Chinese government to support the development of blockchain in China.

A recent report titled " China Blockchain Development Report 2018" (English version in the link) by China Blockchain Research Center detailed the development of the blockchain industry in China in 2017 including the various measures taken to regulate cryptocurrency in the mainland. In a separate section, the report highlighted the optimistic outlook of the blockchain industry and the massive attention it has received from VCs and the Chinese government in 2017.

In summary, the Chinese government have shown a positive attitude towards blockchain technology despite its enforcement on cryptocurrency and mining operations. China wants to control cryptocurrency, and China will get control. The repeated enforcements by the regulators were meant to protect its citizens from the financial risk of cryptocurrencies and limit capital outflow. As of now, it is legal for Chinese citizens to hold cryptocurrencies but they are not allowed to carry out any form of transaction; hence the ban of exchanges. As the market stabilizes in the coming months (or years), we will see undoubtedly see a revival of the Chinese crypto-market. Blockchain and cryptocurrency come hand-in-hand (with the exception of private chain where a token is unnecessary). Countries thus cannot ban cryptocurrency without banning blockchain the awesome technology!

One thing we can all agree on is that blockchain is still at its infancy. Many exciting developments awaits us and right now is definitely the best time to lay the foundation for a blockchain-enabled world.

Last but not least, HODL!

I'm currently a student studying in Shanghai. As a tech enthusiast, I am excited about the tech scene in China. Email me at chewweichun94@gmail.com for working opportunities!

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