Commodity Trading Advisor - CTA

What is a 'Commodity Trading Advisor - CTA'

A commodity trading advisor (CTA) is an individual or firm who provides individualized advice regarding the buying and selling of futures contracts or options on futures, or certain foreign exchange contracts. The Commodity Trading Advisor (CTA) registration is required by the National Futures Association, the self-regulatory organization for the industry. A CTA acts much like a financial advisor, except that the CTA designation is specific to providing advice relating to commodities trading.

BREAKING DOWN 'Commodity Trading Advisor - CTA'

Obtaining the CTA registration requires the applicant to pass certain proficiency requirements, most commonly the Series 3 National Commodity Futures Exam. However, depending on one's role within a firm, alternative tests may be used as proof of proficiency. Generally, CTA registration is required for both principals of a firm, as well as all employees dealing with taking orders from, or giving advice to, the public.

Registration as a CTA is required to give advice regarding all forms of commodity investments, including futures contracts, forwards, options and swaps. Investments in commodities often involve the use of significant leverage and as such require a higher level of expertise to trade properly, while avoiding the potential for large losses.

The regulations for commodity trading advisors dates back to the late 1970s, as commodity market investing became more accessible to retail investors. The Commodity Futures Trading Commission (CFTC) has gradually expanded the requirements for CTA registration over time.

RELATED TERMS
  1. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Commodity Pool Operator - CPO

    Persons or limited partnerships responsible for investing a commodity ...
  4. National Futures Association - ...

    The independent self-regulatory organization for the U.S. futures ...
  5. Advisor

    1. The person or company responsible for making investments on ...
  6. Managed Futures Account

    An account that is like a mutual fund, except that positions ...
Related Articles
  1. Professionals

    Financial Careers According To Hollywood

    Find out if classic films about Wall Street reflect what it's actually like to work there.
  2. Options & Futures

    Your Futures Are In Good Hands With CTAs

    Profit from up, down and sideways markets with commodity trading advisors.
  3. Options & Futures

    Trading Gold And Silver Futures Contracts

    If you are a hedger or a speculator, gold and silver futures contracts offer a world of profit-making opportunities.
  4. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  5. Entrepreneurship

    The Series 3 Exam: Creating A Career With Commodities

    The Series 3 exam is the quickest way to diversify sales and add futures to your investing options.
  6. Options & Futures

    An Introduction To Managed Futures

    Their inverse correlation with stocks and bonds make these alternative investments worth getting to know.
  7. Options & Futures

    Hotshots Needed For Commodity Trading Advisor Positions

    If you can multi-task and you enjoy a good challenge, this lucrative career could be a perfect fit.
  8. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  9. Mutual Funds & ETFs

    VXX: An ETN Performance Case Study

    Examine the five-year performance of the volatility ETF VXX. Break down the performance by analyzing monthly and daily average returns.
  10. Term

    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.
RELATED FAQS
  1. Do hedge funds invest in commodities?

    Learn about hedge funds that invest in commodities. Read about Commodity Trading Advisors who focus specifically on trading ... Read Answer >>
  2. What kinds of acts pertaining to interests in collective investment schemes are excluded ...

    Learn about some of the kinds of acts related to collective investment schemes that are excluded from regulation as financial ... Read Answer >>
  3. What is the difference between a drawdown magnitude and drawdown duration?

    Learn about the two different measures of drawdown, magnitude and duration, and why it's critical for traders to understand ... Read Answer >>
  4. What are managed futures?

    Managed futures are futures positions entered into by professional money managers, known as commodity trading advisors, on ... Read Answer >>
  5. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    Understand the differences between a Chartered Financial Analyst and a Certified Financial Planner. Learn how each approaches ... Read Answer >>
  6. How can I track gold prices?

    Learn how to track gold prices. Gold is a commodity traded as a physical asset and a futures contract. The one you track ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center