There are many professional investors operating in the world of derivatives such as futures. However, it is useful to have an idea of them for every novice market participant who wants to profit from such operations.
Instructions
Step 1
Remember that, originally, futures, or futures contracts, were contracts of future supply that were used by agricultural producers to pre-set prices for products and protect themselves from unsold crops. At the beginning of planting, farmers entered into similar deals for the sale of products and negotiated a price. After the harvest was received, the farmer sold it at the price set in the contract. At the same time, the price was fixed and did not depend on market fluctuations and changes in market conditions. Therefore, sometimes the farmer could receive additional profit if the price in the contract turned out to be higher than the market price, and sometimes, on the contrary, with the rise in market prices, the farmer lost part of his income.
Step 2
Thus, it becomes clear that futures is a contract for delivery in the future. It may or may not be beneficial, but it avoids ambiguity anyway. Currently, futures for agricultural products, oil, gas, metals are traded on all world exchanges. Their value is determined by the price specified in the contract, the market price of the goods, the period from the moment of concluding the contract to the moment of delivery of the goods, fluctuations in supply and demand in the market. A futures contract necessarily includes the quantity and name of the goods, as well as the place where the goods must be delivered.
Step 3
Remember that before the expiration of the term specified in the futures, you can cancel your obligations by selling or buying this futures. Many investors who trade intraday on exchanges only hold futures contracts for a few hours or even minutes. When selling or buying a futures, you can hedge against adverse price movements. There are no restrictions on the number of bought and sold futures, provided that there are enough sellers and buyers on the exchange willing to make reverse transactions. Futures contracts are strictly controlled by the exchange. It is she who determines the quantity, as well as the quality of the goods agreed upon by the participants.
