Managed futures are futures positions entered into by professional money managers, known as commodity trading advisors, on behalf of investors. Managers invest in energy, agriculture and currency markets (among others) using futures contracts and determine their positions based on expected profit potential.

A futures contract is a financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset and are standardized to facilitate trading on a futures exchange.

The potential benefits of managed futures are that the investments may help diversify one's portfolio and, under some conditions, minimize risk. For example, investing in currencies abroad may mitigate domestic risk. Managed futures may also help the individual to profit or minimize risk during periods of slow economic growth.

The potential downside is that futures investments are not guaranteed and they can be very volatile. There is also the possibility of human error because a manager is involved. In other words, if the manager makes an error it could cost the investor a bundle of money. (Learn what those in the know have to say about managing a portfolio and beating the market in our related article Words From The Wise On Active Management.)

Finally, there may be some suitability issues as well. A minimum net worth of $150,000 (not counting your home and other items) may be necessary for investment. There may be some minimum income requirements as well.

To learn more, check out our educational article A Primer On Managed Futures.

  1. What types of items can you buy futures for?

    Learn what items futures may be purchased for, what a futures contract is and discover how the futures markets have greatly ... Read Answer >>
  2. How can I calculate the notional value of a futures contract?

    Learn how the notional value of a futures contract is calculated, and how futures are different from stock since they have ... Read Answer >>
  3. What types of futures contracts are typically sold on an exchange?

    Explore the wide variety of available futures contracts traded on exchanges, which range from agricultural commodities to ... Read Answer >>
  4. How risky are futures?

    Understand how futures contracts are trading and learn what aspect of futures trading poses potentially greater risk than ... Read Answer >>
  5. How are futures used to hedge a position?

    Futures contracts are one of the most common derivatives used to hedge risk. A futures contract is as an arrangement between ... Read Answer >>
  6. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
Related Articles
  1. Trading

    Advantages Of Trading Futures Over Stocks (APPL)

    We look at the top eight advantages of trading futures over stocks.
  2. Investing

    Introduction To Currency Futures

    The forex market is not the only way for investors and traders to participate in foreign exchange.
  3. Investing

    How To Invest In Commodities

    Find out which futures, options or funds will be your perfect commodity portfolio fit.
  4. Trading

    Futures, Derivatives and Liquidity: More or Less Risky?

    Futures and derivatives get a bad rap after the 2008 financial crisis, but these instruments are meant to mitigate market risk.
  5. Investing

    What's The Difference Between Options And Futures?

    An option gives the buyer the right, but not the obligation, to buy or sell a certain asset at a set price during the life of the contract. A futures contract gives the buyer the obligation to ...
  6. Investing

    Crude Oil Prices: Comparing Future Price Vs. Current Market Price

    Discover the differences between oil futures market prices and oil spot market prices and what leads to the differences between the two.
  7. Trading

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  8. Investing

    DBC: PowerShares DB Commodity Tracking ETF

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  9. Investing

    How to Trade Futures Contracts

    Futures is short for Futures Contracts, which are contracts between a buyer and seller of an asset who agree to exchange goods and money at a future date, but at a price and quantity determined ...
  1. Managed Futures Account

    An account that is like a mutual fund, except that positions ...
  2. Futures

    A financial contract obligating the buyer to purchase an asset ...
  3. Managed Futures

    An alternative investment strategy in which professional portfolio ...
  4. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  5. Futures Exchange

    Traditionally, a term referring to a central marketplace where ...
  6. Cash Contract

    A financial arrangement that requires delivery of a particular ...
Hot Definitions
  1. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  2. Nest Egg

    A substantial sum of money that has been saved or invested for a specific purpose. A nest egg is generally earmarked for ...
  3. Denial Of Service Attack (DoS)

    An intentional cyberattack carried out on networks, websites and online resources in order to restrict access to its legitimate ...
  4. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate and graduate students who demonstrate exceptional ...
  5. Wealth Management

    A high-level professional service that combines financial/investment advice, accounting/tax services, retirement planning ...
  6. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
Trading Center