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Home » MANAGED FUTURES

How do I Open a Managed Futures Account ?

managed-account-futures-investor-traders-2With all of the great articles on futures trading, you may be wondering, “Just how do I open a managed futures account”? Well, in recent years, this has become a question we hear often. As we’ll explain below, opening a managed futures account is easy, but despite its apparent simplicity, it’s critical to understand.

Since it’s important to grasp the process of futures accounts, we’ve listed the steps below.  In addition to listing the process step by step, we’ve also included tips so you can complete each stage like a pro! This will give you the tools you need to open your account, while helping you choose the right futures trader for your goals. Scroll down and take a look below!

Steps to Open a Managed Futures Account

1. Investor Defines Profit Expectations:  Before choosing a futures trader to invest with, you must first define your profit expectations. If you enter into an investment with no goals, you could walk out with no shirt. Once you find a managed futures trader with a history of satisfactory yields, all you need to do is weigh the risk against the reward and make the smart decision.

2. Investor Searches through Futures Traders: If you’re looking for a good managed futures trader, check the websites of the top clearing houses. Usually, they’ll promote traders with extended track records, leaving investors quite comfortable.  Once you’ve glanced through their websites, do some Google searches with different keywords related to managed futures.  After you find a few companies, take some initiative and call around to get a feel for feel for the business.

3. Investor Evaluates History of Traders/AUM:  When you speak with a trader, you always want to address two important issues: yields and assets under management.  If they have a good history of audited yields, and a large amount of money under management (50M+), then you may have found the right futures trader. In contrast, if they have little assets under management (less than 10M), whether the yields are good or bad, you must look deeper into their strategy.  In many cases, investing with a small but rapidly growing futures fund can be the wrong decision in the end. Though you can break the bank with an up and coming futures trader, you can also lose it.

4. Investor Selects Top Futures Traders:  After you’ve scoured the internet for managed futures investments, it’s time to eliminate the shaky opportunities.  Usually, it’s best to narrow the list down to 5 traders or less.  Once you evaluate the commodity trader’s information, citing both the benefits and risks, it’s far easier to make the right decision.

5. Investor Chooses their Futures Trader:  After you’ve narrowed down the list of futures traders, the rest is easy. If you contrast the trader’s strategies, yields, histories and risk, the decision should be clear.  Once you choose a futures trader to invest with, it’s time to review the contracts and get started. Though this can be a tough step if you’re new to managed futures, we remind you, education is the only way to make it easier!

6. Investor Completes Contract and Documents: Typically, futures traders don’t issue  their own contracts unless they’re a “Fund”,  “CTA” or “CPO”.   For almost all investors, the contract is created by the company holding the funds, the clearing house. On this contract, the clearing house will address the risks of futures investments and several other related topics.

7. New Futures Account Created for Investor:  Once you complete the contract and provide all required documents, the clearing house will file the paperwork and open an account for you.  Along with the account number, the clearing house will also provide wiring instructions for you to fund your account.  Remember, this is a segregated account at the clearing house that’s only in your name,. The fact is, no one can withdraw funds or authorize trades but you. Though trading can start with a Limited Power of Attorney (LPOA) document, the futures trader can never withdraw money from your account.

8. Investor Funds the New Futures Account:  After the investor receives the account number and wiring instructions, it’s time to get started. For most futures accounts, the investor must wire funds to their new account with “further credit to themselves”.  Once the investor’s money hits their segregated account at the FCM, it becomes untouchable.  Whether it’s a futures trader or family member, no one can access the account without prior authorization.

9.  Authorization Call with Trader and Investor:  Once the funds of the investor hit their clearing house account, the trader is notified.  If the account is managed, then the trading can start immediately. If the account is non-discretionary, the trader and investor must have an “authorization call”.  On this call, the trader will explain the strategy and ask for permission to implement it on their behalf.   After the call is complete, the trader can manage the investor’s account at their discretion.

10. Futures Trading Starts Next Good Day:  After the wire and authorization calls have been completed, trading starts the next “good day”.  In many cases, futures traders will jump right into the market, but if it is best to wait, they may do so for a few days.

Though the process seems long, it really isn’t. In fact, you can have a managed futures account opened within just a few days.  Despite the expedience of the process, you should always remember, there’s NO rush to make your decision.  Since you should allow a futures trader 3-6 months to prove themselves, good preparation is the key to reducing time waste and poor decisions.

In summary, futures investing isn’t fun if you’re unprepared, but it is when you are earning high yields. For your benefit, make sure you understand every detail of the futures account process. Remember, though each step may seem self-explanatory, they’re all vital to your success

InsideTrade LLC Staff
Phone: (949) 444-2111
Info@InsideTradeLLC.com

6 Comments »

  • MC funds said:

    Very informative and correct. I have been involved in the futures business for nearly 9yrs. All traders are registered with the appropiate exchanges ie Eurex, Liffe, CBot etc

  • newguy said:

    does anyone know of a futures trader that can prove his success? i wanted to invest but looked at pfgbest and other sites and havent really found a trader with a history i am comfortable with. can someone please advise me?

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