Welcome to Providio's FAQ's.
You'll find us as close as a telephone, fax, e-mail, or instant message, but many of your questions will be answered here. If you don't find an answer to a question you have, want a more in-depth answer, or have a comment, please call us at 1-312-604-2956. Visit us later and your question or comment will be posted on our site.

GENERAL:

Q: What are futures?
A: Futures are commodity contracts that are slated for delivery or expiration at a future time.

Q: What are futures options?
A: There are two types of futures options: calls and puts. Calls give the owner or purchaser the right
but not the obligation to buy the underlying futures contract for a certain price (the strike price) by a certain date (the expiration date). A put gives the owner the right but not the obligation to sell the
underlying futures contract.

Q: What is the difference between a Full-Service/Broker-Assisted Account and a Self-Directed Account?
A: Full-Service/Broker-Assisted Accounts are appropriate for novice traders and traders who desire a
greater level of individual attention from their broker. Self-Directed Accounts are for traders who
prefer to make all of their own trade and execution decisions and desire little or no assistance from
their broker.

Q: Is there risk in trading futures, even with a system or a money manager?
A: YES! There is always risk in trading futures and options. Only risk capital should be used when
trading futures. Always use stops to limit losses.

Q: What is margin?
A: Also known as performance bond, margin is the amount of money the exchange or clearing firm
requires the account holder to post in order to hold a futures or short option position. Each
commodity has different margin requirements that are subject to change without notice.

Q: Who is Providio Trading?
A: Providio is an Independent Introducing Broker located in Chicago, IL.

Q: Why choose Providio?
A: Flexibility. Providio provides personalized service and accounts tailored to your wants.

Q: Is Providio a Discount Broker or Full-Service firm?
A: Both. Providio offers discount to full service accounts and everything in between.

Q: Does Providio offer an electronic trading product?
A: Yes. However, this is not Providio’s main focus.

Q: Does Providio offer non-futures services?
A: Yes

Q: If I am a new trader, what services does Providio offer me?
A: Providio will work with you to develop a trading plan commensurate with your trading experience.

CUSTOMER SERVICE:

Q: Who do I call if I have a problem with my Providio trading account?
A: Call Providio at 1-312-604-2956 immediately if there is any problem with your trading account.

Q: Does Providio offer daily checkout?
A: Yes. Call Providio at 1-312-604-2956 to checkout anytime during or after the trading day.

Q: Does Providio pay interest on trading account balances?
A: Providio pays interest on higher account balances. Call or email us for details.

Q: Does Providio use Exchange Minimum Margins?
A: Yes. However, Providio and our FCM(s) reserve the right to raise margin requirements without notice.

Q: How do I withdraw funds from my Commodity Trading Account?
A: Call us before 10:30 am (CST) for funds to be wired or mailed the same day.

Q: Can I transfer another commodity account into my existing commodity account at Providio?
A: Yes. Providio will accept all account transfers as long as the account is the same type and in
the same name.

Q: Can I transfer my stock account into my existing commodity account at Providio?
A: No. You may send risk capital from your stock account as long as the account is in the same
name as the name on your commodity account with Providio.

Q: Does Providio offer research?
A: Yes. Providio offers a variety of research based upon the client’s FCM.

HEDGING:

Q: What is hedging?
A: Hedging is, in effect, insurance against the price risk of a particular resource. The "resource" component can vary from physical commodities to interest rates and foreign exchange rates. Hedging helps limit the exposure to adverse price fluctuations not only in a resource you currently own, but also a resource you will own.

Q: What can be hedged?
A: The different types of resources that can be hedged are too numerous to mention specifically. However, hedging can be done by just about anyone: a farmer can hedge his crops he will sell, a utility can hedge the fuel it will buy, or an individual can hedge his portfolio of investments.

Q: What tools can I use to hedge?
A: A hedge can be executed by using forward contracts, futures contracts or options on futures. Each method has advantages and disadvantages. Providio Trading Consultants, Inc. clients hedge with futures and options on futures. We will help you determine which hedging tool suits your needs best.

Q: What is the difference between using futures or options and forward contracts to hedge?
A: There are several differences between using futures or options and forward contracts to hedge.
Futures and option contacts are exchange-traded. Two separate bodies regulate exchange-traded products: the exchange itself and the Commodity Futures Trading Commission (CFTC). This limits the credit risk of entering into a forward contract. Futures and options contracts also tend to be more liquid than forward contracts. It is generally easier to execute a trade in the futures and options markets than find another entity with whom to negotiate a forward contract. Forward contracts are customizable. Whereas futures and options have contract specifications, a forward contract's size and time constraints can be negotiated between private parties.

Q: What is the difference between using futures and options on futures to hedge?
A: Futures contracts enable you to lock in a specific price for your resource. This protects you from an adverse price move. However, if there is a substantial price change in your favor, you miss out on the profits. In addition, you must meet any margin call, negatively affecting your cash flow. Options on futures enable you to participate in profits on a price change in your favor while only risking the price of the premium paid for the option.

Q: What does it cost me to hedge in the futures market?
A: All futures and options trades are subject to commissions and fees. These are usually fixed costs and negotiated with a futures broker. When hedging with futures, you are subject to opportunity costs. By fixing your price at a certain level, you forego any profits if prices move in your favor. It also costs money to meet any margin calls throughout the life of the hedge. When hedging with options on futures, the price paid, or premium, is a cost that must be met up front. This premium will also decrease in value over the life of the hedge.

Q: What is the difference between hedging and speculating in the futures market?
A: Hedging is the process of transferring the price risk of a product, commodity, or resource to another party. Speculation is the assumption of risk for the express purpose of making a profit. The margin requirement of a hedge account is generally less than that of a speculative account. This is because hedgers have an interest in the underlying commodity, either for purchase or sale. Hedge trading accounts are generally less active than speculative accounts (e.g. day traders).

Q: What accounting and tax issues are involved when a business undertakes a hedging program in the futures markets?
A: The Financial Accounting Standards Board (FASB) has adopted Generally Accepted Accounting Principles (GAAP) to be followed when a business accounts for a hedge transaction using derivatives. Providio urges you to consult your accounting professional when considering these transactions.

MANAGED FUTURES:

Q: What are managed futures?
A: Managed futures are commodity accounts traded by Commodity Trading Advisors (CTAs) or
Commodity Pool Operators (CPOs). These professional traders typically charge incentive and
management fees as compensation for their trading expertise. . Either an individual or a pool of investors may fund these accounts.

Q: What are the advantages of including managed futures in my investment portfolio?
A: There are several advantages of using managed futures in your investment portfolio:

• Managed futures can offer an important diversification opportunity. Because their performance is often not correlated with other asset classes, their addition to an investment portfolio can help smooth overall returns.
• Managed futures provide easy access to numerous global investment opportunities: precious metals, energies, foreign currencies, agricultural products, etc.
• Selling short, entering a position with the expectation that the asset will decline in value,
  is simple and no different than buying or going long.
• Futures' trading is leveraged. There is no requirement to deposit an entire asset's value
  upon investment.
• High liquidity can make position entry or exit easier.
  

Q: Are there special risks in including managed futures in my investment portfolio?
A: Providio stresses the importance of recognizing the risks in including managed futures in an investment portfolio. Understanding these risks will aid in allocating an appropriate portion of an overall portfolio to managed futures. Contact us for a more thorough discussion of the special risks in managed futures.

• Managed futures have a higher fee structure than most mutual funds. Additionally, for CTA
  traded individual accounts, transaction costs can be significant.
• The leveraged nature of futures trading magnifies price volatility. This often makes managed futures' returns rather volatile with large gains and losses.
• Some futures markets may not have the capacity to absorb the significant quantities of capital typically associated with the securities markets. These markets are usually traded as part of a diversified program unlike those that are more narrowly focused.

Q: What is a commodity futures fund?
A: A futures fund is an investment company organized to trade commodity futures. It is organized
much like a stock/bond mutual fund. Contact us for information on some important differences
between futures funds and stock/bond funds.

Q: What is a Commodity Trading Advisor (CTA)?
A: A CTA is a professional trader who controls individual managed futures accounts.

Q: What is a Commodity Pool Operator (CPO)?
A: A CPO is a person or entity that either trades or decides who trades funds that are pooled for investment purposes, called a Commodity Pool. Typically, Commodity Pools are organized as
limited partnerships.

OPEN ACCOUNT:

Q: What types of futures accounts does Providio offer?
A: Providio offers all standard account types: individual, joint, corporate, trust, partnership
(general or limited), self-directed IRA, etc.

Q: How do I open an account with Providio?
A: Call Providio at 1-312-604-2956, email us at providio@providiotrading.com, or fax us at 1-312-803-1896 to determine what account forms are necessary. In some cases, accounts can be opened online.

Q: Can I have more than one account at Providio?
A: Yes, accounts may be opened to address the varying needs of any trader. Call Providio at
1-312-604-2956, email us at providio@providiotrading.com, or fax us at 1-312-803-1896 to determine what account forms are necessary.

Q: How long does it take to open an account with Providio?
A: Providio can open some trading accounts in as little as one day.

Q: What is the minimum account size?
A: The minimum account size Providio will accept for self-directed accounts is $5,000.

Q: What is Providio's pricing structure?
A: Providio offers a flexible pricing structure for all types of trading accounts.

Q: How do I add risk capital to my Commodity Trading Account?
A: You may either send money via Bank Wire or mail a personal check payable to your FCM to:

Providio Trading Consultants, Inc.,
216 West Jackson Boulevard, Suite 925
Chicago, IL 60606