How to Trade Treasury Futures
Futures contracts are traded on several durations of Treasury notes and bonds. Each Treasury futures contract calls for the delivery of a $100,000 Treasury security on the last business day of the contract month. Futures trading on Treasuries generates profits from the change in the current interest rates of the bonds.
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Instructions
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Open and fund an account with a broker registered with the Commodity Futures Trading Commission (CFTC). Futures brokers must be registered with the CFTC and are usually not in the stock brokerage business. The typical minimum initial deposit for a commodities and futures broker is $5,000 to $10,000.
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Download and install trading software from the broker's website. Futures brokers typically offer several software and price quoting package. A representative from the broker can help you select the correct package and set it up for trading Treasury futures. Commodity brokers understand futures are new for many traders and will provide help and suggestions over the phone.
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Practice trading using a simulated money account. The futures broker will help you set up the trading software with a simulated money practice account and a real money account. Use the practice account to learn how to use the trading software and develop your own trading strategy. Continue to trade in the practice account until your strategy shows consistent profits.
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Start real money trading with single contract trades. A single Treasury futures contract will have a margin requirement of $1,500 to $3,000, depending on the maturity. This is your investment to enter a trade. You buy, or go long, a contract if you think interest rates will fall, and sell. or go short, if you expect rising interest rates. Enter the opposite order, sell or buy, to close a trade and realize a profit or take a loss.
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Tips & Warnings
Use a notebook to log the results of all your trades--practice and real money. Make a note of any strategy adjustments and the results. Successful traders know the results and reasons for every trade they make.
Several Treasuries futures are available for different maturities. Trade futures on T-bills for short-term rates, three- and five-year Treasury notes for medium-term rates and 10- or 30-year Treasuries for long-term rates.
Futures trading entails a high level of risk, and traders can lose the entire value of their trading account. Trading futures should be done only with money the trader can afford to lose.
