PrintOverview
All orders placed on the NYMEX to buy or sell contracts are done in a very precise manner where each party involved is fully aware of the details of the transaction. There are specific nuances in the flow of the orders themselves. As legally-binding agreements, non-performance under a futures contract can have severe financial, and legal, consequences. Therefore, most phone conversations are recorded to ensure the accuracy of the orders placed as well as the results of the execution of those orders. Standardized Order Forms are used on the floor of the NYMEX during order execution. Daily "check-outs" occur between Brokers and their clients for verification of all trades conducted that day. In this lesson, we will follow a natural gas futures contract trade from the beginning to end for a producer and end-user wishing to lock-in a fixed-price for a 12-month period ("strip").
Learning Outcomes
At the successful completion of this lesson, students should be able to:
- Understand the order flow from the physical customer through the Exchange.
- Recognize that very few contracts ever actually get delivered physically.
- Understand the concept of the “zero-sum” game in financial contracts.
- Know some primary terminology tied to financial commodity trading.
- Gain a cursory knowledge of the concept of technical analysis
What is due for Lesson 8?
This lesson will take us one week to complete. There are a number of required activities in this module. The chart below provides an overview of the activities for Lesson 7. For assignment details, refer to the location noted.
All assignments will be due Sunday, 11:59 p.m. Eastern Time.
REQUIREMENT | LOCATION | SUBMITTING YOUR WORK |
|---|---|---|
| Reading Assignment: Chapter 3 | Errera & Brown | No submission |
| Mini-lecture: NYMEX Order Flow | Mini-lecture: NYMEX Order Flow page | No submission |
| Lesson Activity: OTIS Trading Simulation; "Trading Places" video | Lesson Activity page/ANGEL | Submitted through OTIS |
| Lesson 8 Quiz | Summary and Final tasks page | Submitted through ANGEL |
Questions?
If you have any questions, please post them to our Questions? discussion forum (not e-mail), located under the Communicate tab in ANGEL. The TA and I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.