Another Big Inflation Report Is Expected Tomorrow. Here Are Some Futures to Know About

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Inflation has done more than just roil the stock market this year. It’s also triggering activity across the futures market, covered in today’s post.

Contracts tracking products like crude oil, gold, natural gas and soybeans have been on the move as the economy swings back into gear. Demand for many products has surged as lingering effects of the coronavirus pandemic limit production and supply.

The result has been an upward spiral in prices. Economists forecast that the Bureau of Labor Statistics will report a 7.3 percent consumer inflation (CPI) reading tomorrow, which would be the highest since February 1982. The business-focused producer price index (PPI) follows on February 15.

While costs like used cars and housing have driven some of the increase, commodities account for most of the cost pressures. For example, the last CPI report showed products like gasoline and fuel oil up more than 40 percent in December. Meat prices and other non-food commodities also had double-digit jumps.

Investors looking for exposure to these trends may consider owning stocks associated with commodities. For example, a wide range of companies produce energy, metals and agricultural goods. But traders can also target the products directly with futures.

What Are Futures?

Futures are derivative contracts, tied to an underlying asset. Investors access them through separate accounts than stocks and options.

Futures track simple price movements. Traders don’t own shares, but go “long” (buy) or “short” (sell) a certain number of contracts. They must hold a certain amount of capital, known as margin, to take positions. This is different than stocks, which you own directly.

The most actively traded futures contracts track major stock indexes like the S&P 500 and Nasdaq-100. Those are covered in other articles. Today we’ll focus on futures contracts impacted by higher inflation.

Crude oil futures (@CL), daily chart.

Crude Oil Futures

Crude oil futures are the most actively traded commodity futures, according to TradeStation data. The main product in the U.S. is Nymex WTI, trading with the root symbol CL.

Each contract represents 1,000 barrels of West Texas Intermedia crude oil. A customer long one contract will make $1,000 if oil rises $1 per barrel. Likewise he or she would lose $1,000 from a $1 drop. The exact opposite would be true if they were short.

CL contracts expire each month, three business days prior to the 25th (assuming it’s a business day). It’s usually on the 22nd, but can fall on the 21st. The symbol for the current month is CLH22.

Note that CL uses the expiration code for its delivery month — not the expiration month. Therefore the contract that stops trading in February includes the March code of “H”.

Corn and Soybean Futures

Corn and soybeans are the most actively traded agricultural commodities. Both have rallied in the last year, spurred by high fertilizer prices and weather conditions.

Corn futures use the root C. Each contract represents 5,000 bushels. They expire in March, May, July, September and December. The symbol for the current corn contract is CH22.

Soybeans use the root S. Each contract represents 5,000 bushels. They expire in January, March, May, July, August, September and November. The symbol for the current soybean contract is SH22.

Unlike crude oil, corn and soybeans have the same expiry and delivery months. Both stop trading on the business day prior to the 15th of each month.

Corn futures (@C), daily chart.

Gold Futures

Gold futures control 100 ounces of gold each. Investors often view the precious metal as an inflation hedge because of its scarcity.

Gold futures use the root GC. They expire on the third last business day of each month.

While the next gold contract expires in February, the current active contract expires in April. Its symbol is GCJ22.

Natural Gas Futures

Natural-gas prices have more than doubled from their long-term low in December 2020. It’s the most volatile of all the commodities cited in this article.

Natural gas futures control 10,000 Metric Million British Thermal Unit (MMBtu). They use the root NG and expire each month on the third last business day.

The symbol for the current month is NGH22.

Like crude oil, NG expires one month before its delivery month.

Treasury Futures

While U.S. Treasury securities aren’t commodities, they’ve been moving as the Federal Reserve prepares to raise interest rates.

Treasuries are priced based on their yield, which moves opposite to price. Their values decline when interest rates rise. (Yields are basically the same as interest rates.) Longer-dated Treasuries are typically more volatile.

Ten-year Treasury bond futures control $100,000 in face value of U.S. sovereign debt. They expire quarterly: in March, June, September and December. Their last day of trading falls seven business days before the last business days of their contract month.

Ten-year Treasury bond futures use the root TY. The symbol for the current month is TYH22.

There are also five-year futures using the root FV. The symbol for the current month is FVH22.

The 30-year Treasury futures use the root US. The symbol for the current month is USH22.

10-year Treasury futures (@TY), daily chart.

More Information For Futures Traders

Customers seeking more information on futures can get further more details on TradeStation’s specifications page.

Traders can also use “continuous” contracts for charting purposes (“@”+root). These combine expired contracts into a single historical price feed. The table below includes some basic details on the products covered above.

ProductActive Month12-month
Change
Volatility
Crude Oil (@CL)CLH22+65%24%
Corn (@C)CH22+60%21%
Soybeans (@S)SH22+21%21%
Gold (@GC)GCJ22-1%13%
Natural Gas (@NG)NGH22+38%102%
10-Year Treasuries (@TY)TYH22-5%5%
Five-Year Treasuries (@FV)FVH22-5%3%
30-Year Treasuries (@US)USH22-5%9%
Source: TradeStation Data. 30-day historical volatility is shown.
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