Back to the Futures

In the 1983 hit comedy Trading Places, commodities trader Louis Winthorpe II rhapsodizes on the beauty of futures trading: &#39Think big, think positive, never show any sign of weakness … Buy low, sell high. Fear? That&#39s the other guy&#39s problem &#39 &#39
If that doesn&#39t get your competitive juices flowing, nothing will. Dan Aykroyd&#39s Winthorpe, the comic king of commodities trading, may have simplified the matter, but he had one thing right: Few careers match that of a commodities trader for mastering the elusive art of shrewd investing and for keeping the adrenalin coursing through you.

A big player in the world commodities business is the New York Mercantile Exchange. Along with CO-ED magazine, NYMEX is offering the chance for students to compete for scholarship money and other prizes while learning the ins and outs of the investment and commodities industry.

THE TRADING LIFESTYLE
To trade &#39futures contracts,&#39 where huge sums of money is always on the line, your arena is the vast, boisterous trading floor of the Exchange, the forum in which hundreds of men and women frantically shout and wave at one another in a choreographed chaos that serves as agreed-upon shorthand for conducting business. Oversized digitalized display boards, containing row upon row of colorful numbers and changing by the second, reflect the furious deal-making taking place. Welcome to the complex, volatile industry known as the futures market.

NYMEX is the largest physical commodity exchange in the world, with billions of dollars in energy and metals futures and options changing hands each day. This year, more than 160 million oil, natural gas, gold, silver and other key strategic commodity contracts will be traded at the Exchange, with a notional value of $6.5 trillion. For someone who is smart, ambitious and can think fast on their feet, there is no limit on opportunity.

Futures are contracts, a bind commitment to buy and sell a commodity or financial product. Commodities are the raw materials of our industrialized economy; the products made from them keep world commerce humming along.

However, the prices of commodities are particularly vulnerable to vagaries such as weather (result: bad crops) and political turmoil (result: oil embargo), which can send prices plummeting or soaring and bring abrupt peaks and valleys to the already iffy dynamics of supply and demand.

To assure that producers (miners) and users (plumbers) get a fair price, futures contracts were invented to guarantee an agreed-upon price for a good when it&#39s bought in the future. The contracts are basically hedges on how prices will move in the future. And they are traded on exchanges such as the New York Mercantile Exchange, one of six in the United States.

PLAY THE GAME!
To feel the fascinating, Mach I pace of futures trading, NYMEX invites college students to participate in its competition, &#39Back to the Futures.&#39 Students at the University of Texas, Southern Methodist University, the University of Houston, Texas A&M and Rice University will be the first schools competing. The competition will expand to include as many as 20 schools, grouped to invite regional rivalries.

Each team, comprising five to 10 economics majors, is given $100,000 of &#39money&#39 with which to trade two commodities: crude oil and natural gas. A student representative from each team, which also relies on a professor/advisor, makes weekly phantom trades, which includes live voices and daily posting of results through a brokerage account. It&#39s part of the same program that companies use to actually train their traders.

Who&#39s up and who&#39s down will be charted at CO-EDmagazine.com, which will show daily results and the daily &#39P/L,&#39 known as &#39marking-to-market,&#39 to see how their original investments are doing. CO-EDmagazine.com will also carry students&#39 stories that explain their investment strategies. The April issue of CO-ED will feature student reaction to the competition. Later, the September issue of CO-ED, appearing August 15th, will announce the winners and what they have won (which ranges from scholarship money to merchandise and vacations).

So, see if you have a future in trading futures. Billy Ray Valentine and Louis Winthorpe obviously did.