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Trading Futures Contracts at Interactive Brokers


Did you know that Interactive Brokers offers more than stocks and options? Besides warrants, contracts for difference, and currencies, the firm also provides trading in futures. And we鈥檙e talking about indexes and interest rates, not just commodities. We鈥檙e going to take a look at futures at IB and then see how its services in this area compare to some of its competition.


Buying and Selling Futures on IB鈥檚 Desktop Program


Trader Workstation is Interactive Brokers鈥 flagship trading system. It can be downloaded free of charge, and even better, there鈥檚 a demo mode for extra practice. Due to its complexity, it does take time to learn. Thankfully, futures contracts can be traded in simulated mode for extra practice.


Interactive Brokers Futures Watchlist


To get started trading futures, we recommend first building a futures watchlist within Trader Workstation. To do this, click on the plus sign in the upper-right window in the default TWS setup. Here, you鈥檒l be able to create a new watchlist. You should give it a name associated with futures so you can quickly distinguish it from other lists.

Once you have your futures watchlist set up, it鈥檚 time to add some contracts. The easiest way to do this is to know the ticker symbols of the contracts you鈥檙e interested in and type them into the first column. For example, 鈥楲C鈥 is for live cattle. Be sure to select futures when you type in a ticker symbol because the software will return stocks and other investments if it can find them with the entered ticker symbol. Multiple expiration dates may be presented as well.

Selecting a contract in the futures watchlist will automatically generate a chart of the contract in the graphing window. Here, price action can be analyzed and technical studies can be used.

When you鈥檙e ready to place a trade, the order ticket sits at the upper-left portion of the platform. Just select a futures contract in the watchlist and the order ticket will be automatically populated. Then you simply need to select buy or sell, depending on which side of the trade you want to be on, and fill out the rest of the order form.


WebTrader


Futures can also be traded on IB鈥檚 simpler browser platform. Called WebTrader, the software doesn鈥檛 have the same level of charting, but orders can be submitted. You鈥檒l need to know the contract symbol to get started.


Interactive Brokers Futures Trading


To generate a chart on a symbol, enter the ticker in the upper portion of the screen where you see a green plus sign. This will generate a chart with up to 5 years of price data. There are no technical studies on this platform.

The trading ticket is near the bottom. You鈥檒l need to re-enter the ticker down here to start the order. After entering the symbol, you鈥檒l need to choose the expiration month. This system is a little different than the desktop platform, as TWS automatically links expiration months with contract symbols.

On WebTrader, it鈥檚 possible to specify start and end times for orders, a nice feature. Order types include market, limit, and on-the-open. During our testing, we could only use one routing option. It鈥檚 possible to attach a sell trailing order to an initial order. This feature can help to limit losses.


Futures Research


A good place to start futures research at Interactive Brokers is on the firm鈥檚 website. A futures search engine is able to scan the futures markets globally in search for contracts meeting any number of criteria. These include symbol, exchange, country, and currency. Some of the exchanges we found include the London Metals Exchange, the Mexican Derivatives Exchange, and the Electronic Chicago Board of Trade. There鈥檚 also a good educational video on IB鈥檚 site that describes in detail how to trade futures contracts on Trader Workstation.

A futures listing page at IB displays all the exchanges where it鈥檚 possible to trade contracts. Details include the hours of operation, the specific contracts that trade, and the currencies they trade in.


Options on Futures


Besides futures, Interactive Brokers also offers its clients the ability to trade options on futures. The process for trading them is the same as for futures. You鈥檒l need to know the ticker beforehand; and within TWS, make sure you select 鈥楩utures Options鈥 and not 鈥楩utures鈥 when selecting a contract.


Interactive Brokers Options on Futures


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IB Futures Pricing


The cost of trading futures and options on futures at Interactive Brokers is the same. Regulatory and exchange fees are always passed onto the customer at IB.

On a fixed commission schedule, contracts are 85垄 each. A few contracts, such as e-mini FX futures and bitcoin futures, have different prices.

There鈥檚 also a tiered commission schedule that traders can elect. Under this system, the commission varies from 85垄 to 25垄, depending on monthly volume. The trade fee begins dropping after 1,000 contracts.

Interactive Brokers tries to be a global firm. As such, it鈥檚 possible to trade futures on foreign exchanges, and the commissions vary quite a bit, depending on the region. In Europe, the tiered commission for futures is 鈧?.90 to 鈧?.25 per contract. The fixed commission varies from country to country. It is as high as 鈧?.50 in Belgium and as low as 鈧?.40 in France.


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Comparison


A few of Interactive Brokers鈥 rivals also offer trading in futures. E*Trade is one such firm. The broker-dealer charges $1.50 per contract on both futures and options on futures. Bitcoin contracts are more expensive. Although the $1.50 commission is higher than IB鈥檚, E*Trade does not have a monthly minimum commission like IB. E*Trade customers don鈥檛 get access to international futures markets, one weakness compared to IB.

One area where we think E*Trade is stronger than IB is in futures education and research. E*Trade does a better job of displaying information in a user-friendly way. It also has learning materials on its site that would be better for beginners.


Judgment and Recommendation


Interactive Brokers is the ideal choice for experienced and global futures traders. Because its tools aren鈥檛 the most user-friendly, beginners should start at another broker that offers simpler tools and lower monthly costs.


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