What are futures?

Futures – is a contract, the essence of which can be applied to the example of farmers, because in fact, it all started with them. The simplest example of this is when one man sows the field; spend about 100 000 dollars and is willing to make in the fall, removing a certain crop, 120 000 dollars (earning 20%). He is looking for a buyer, they agree, and in September, when it comes time to make a deal, they decide whether they are satisfied with the agreement that they had made. In this case, there are two possibilities: if the crop was not enough, then the farmer is not profitable to sell at price, which agreed, because then the farmer will have nothing or loss. Then he can’t find another buyer at a higher price. In the second variant, if the harvest was great, then the buyer can refuse to execute the transaction. And then the farmer may have problems because he will need to look for new customers at a lower price. Thus, the forward contract (agreement in words) carries several risks that may be on both sides of the transaction. Futures can be called an analogue forward with the only difference that the Exchange will ensure that the transaction will be made regardless of the outcome of the transaction. So, Futures – is a derivative instrument. And if it is a derivative, then there must be some kind of base. In a trading system there are futures for the following tools: for liquid shares, for indices, for oil, for the currency, for bonds, for grain, for precious metals, for electricity. To understand how this tool works, suppose that today the price of oil is $ 45 per barrel. And we decide that our assets will grow. Then we can buy a futures contract and wait until the price for it will grow. Here is an example of profit and loss on the date of expiration. (Expiration - this is the date when the futures contract ceases to exist or otherwise - the date of the contract). Suppose that our prediction was justified. And we fix income equal to the difference of price that exists at the moment and the price of entry into the position. If the price falls, and we are the buyer, we can have a loss. If we are the seller of the futures, meaning we are opening a short position, so if futures growth we have profit, if it falls - a loss. Standardization of futures contracts. Basic asset – the one is what is traded for futures (oil, gold, grain, etc.) The amount of basic asset. By purchasing or selling a futures contract, it is understood that we are selling, for example, 100 ounces of the basic asset. Step of the price. It is measured in points. The cost of a step of the price is different for different instruments. Date of delivery/settlement. At this date, there is a recalculation of profit and loss. It is possible to request delivery of the basic asset. Guarantee provisioning. Block of the amount of traded contract, issued to ensure that your account may be charged to deliver profit to the person who opened the opposite position. For work with the futures market, it is enough to choose AzaForex broker, at the web site of which you can take advantage of using the proposed online platform. The most popular assets in the commodities futures market. Oil is the main source of the country's exports in many countries. The oldest stock exchange instrument of futures is an oil that for decades determines the way of the global economy. Oil is traded via futures contracts with delivery on a specific date. Crude oil futures is a contract that allows with the price of an agreement to get or sell 10 barrels of oil in the future at the time of expiry. Except for deliverable oil futures, there are also calculated given futures traded in the money at the moment of expiration. In the case of futures for oil, the most liquid are common futures with monthly expiry. In the world, there are many different grades of oil. The chemical composition of the oil is different from well to well. To facilitate the export the standard grades of oil were invented. The rate of oil depending on its different grades is different in the range of 10-15%. There are two global oil trading centres in London and the United States. There the oil listed, so-called Brent and Light Sweet. Other grades of oil are sold either at a premium or a discount. Gold, thanks to its thermal and electrical properties, is widespread in the industry. The volume of use in electrical engineering is about 30%. But the greatest value of this metal has as a material for making jewellery, as well as a way to protect assets against the depreciation of money. Drawing attention to the futures of gold is a reasonable opportunity to hedge against risks. The rate of gold instantly responds to all of the world economic news, the change in indicators and indices. Moreover, even the popularity of gold among the population of a state can significantly affect the pricing. Most exchanges used computational gold futures, which are great for speculative operations. Rather a low amount of security contracts attracts traders with highly liquid gold. A choice of a broker depends on the conditions, which it offers to trade this instrument. Silver. This precious metal, is practically not subject to oxidation and corrosion, as well as gold, has excellent electrical characteristics and heat conductivity. All these qualities allow for wide use of silver in the industry. Of course, silver is used in jewellery and as a precious metal. The melting of silver jewellery increases the proportion of silver as a metal recycling. Industrial applications typically do not involve the re-use of silver. Silver is also attractive for storage in the form of a reserve in billions. In the future, predicted a significant revaluation of the metal and the growth of prices for it. And as a consequence, it creates favourable conditions for speculative trading. Choose AzaForex futures for maximum earnings for commodity exchange.