Futures trading
The easiest way to trade futures is explained by an example. Suppose there is a seller who wants to sell a ton of grain. He may sell the grain in the cash market (spot market, spot). Thus, the seller will transfer the grain to the buyer, and in return receive the money. Consequently, the deal will happen at some point in time, in a certain place and, in fact, will be completed. This means that both parties have desired: the buyer - the goods and the seller - the money for it. Most ordinary goods and sold.
But the seller has another opportunity. Imagine that he does not sell grain, and the obligation to supply corn to the buyer at a certain fixed period of time. This obligation is called futures. I must say that, unlike the sale of goods on the spot market, the deal when trading futures is not complete. That is, the buyer has already paid the required amount, receiving in return the seller's obligation. But the product itself had not been received. In addition to this, and not all of the seller receives the money for a ton of grain, but only a part. The balance will receive only if the buyer delivers the goods. Thus, the buyer becomes the owner of a futures contract that he can keep both for yourself and buy in the end, or a ton of grain, in turn, sell it in the futures market. Never mind that the buyer will do with the contract as long as it remains unfulfilled. The main thing is that the seller is committed to deliver grain of a specified quality within the prescribed period for a specified amount, and the owner of the futures contract (ie the buyer) has made a commitment to accept the goods delivered and pay the balance of the price.
Consequently, the futures contract obligates both the seller and buyer. According to its principle, the principle of operation is repeated futures options. But, in the case of options, the obligation is imposed only on the seller and buyer of the option can be as buy (sell) the underlying asset, and not to exercise this right. Then, unlike the situation with the futures contract, the buyer need not pay any additional amount, because he has already paid a premium option, which he runs the risk. Well, the option seller receives a premium in any case, but the risk of delivery of the underlying asset. From this example it is possible to deduce the classical definition of futures.
Futures, or futures contract (futures) is a derivative financial instrument, a standard fixed-term contract, stock purchase and sale of the underlying asset, concluding that the parties stipulate only the price level and indicate the delivery of the underlying asset without incurring any obligations to the exchange until then, until the time comes performance of futures.
At each exchange when trading futures, there are different requirements for futures contracts, which may include not only the procedure and its delivery date, but the quality of the goods and the quantity. Futures contracts can last a few months, and reach more than three years.
