Why Trading Futures?

  For many investors, the futures market is the fastest growing financial sector in the world. To a large extent, this is because a wide range of different strategies and high liquidity. However, many private traders seems too risky and complicated. Let us understand whether this is so.

  Futures - a derivative contract to buy/sell the underlying asset at a certain date in the future, but at the current market price. Accordingly, the object of such a contract (the underlying asset) can be stocks, bonds, commodities, currencies, interest rates, products and other.

  A simple example. The farmer planted wheat. The price for this product on the market today, conventionally, is $100 per ton. At the same time predictions are made that it will be a good summer and harvest in autumn. Excellent that always cause the increase in supply in the market and falling prices. The farmer does not want to sell grain in the fall of $50 per ton, so he negotiates with a certain buyer that is guaranteed to put him a ton of grain in 6 months, at the current price of $100. That is the farmer thus acts as the seller of a futures contract.

  In the world of online trading, everything works the same. All futures contracts are placed on the stock exchange, and the initial contract price may begin to change (it all depends on the demand). Now the fun part: if you want to make money, you will be beneficial to buy a futures contract at a lower price and sell more expensive (pure speculation). In this case, you can grab the profit.

Trading futures is more affordable than other financial tools, because you are actually buying contracts (which are much cheaper), not the real assets, and sell them before expiration time. They call it “making money from the air”.