Futures trading
The easiest way Futures trading is explained by an example. Let, there is a seller who wants to sell 1 ton of grain. He can sell the grain in the cash market (spot market, spot). Thus, the seller will give the grain purchaser, and in return will get the money. Therefore, the deal will happen at a certain time, in a certain place and, in fact, will be completed. This means that both sides got what you want: the customer - goods, and the seller - the money for it. Most of the conventional goods so sold.
But the seller has another opportunity. Let's imagine that he did not sell grain, and the obligation to deliver to the buyer the grain in a certain fixed period of time. This obligation is called a futures contract. I must say that, in contrast to the sale of goods on the spot market, the deal in Futures trading remains unfinished. That is, the buyer has paid the required amount, receiving in return the obligation of the seller. But the goods he has not received. In addition, the seller does not receive all the money for 1 ton of grain, but only part of them. The remainder he will receive only then, when has delivered the goods to the buyer. Thus, the buyer becomes owner of the futures contract that he can, to keep to himself and to buy, in the end, a ton of grain or, in turn, sell it on the futures market. And no matter what the buyer would make the contract until he remains unfulfilled. The main thing that the seller is committed to supply grain specified quality within the established term for a specified amount, and the owner of the futures contract (i.e. the buyer) took the obligation to accept the delivery of the goods and pay the balance of its price.
Therefore, a futures contract will require both the buyer and the buyer. In its principle, futures repeat the principle of the options. But, in the case of options, the obligation is imposed only on the seller and the buyer of an option can, how to buy (sell) the underlying asset, and not take advantage of this right. Then, in contrast to the situation with a futures contract, the buyer will not need to make any additional amounts, because he has already paid the premium of an option, which he and risks. Well, the option seller receives a premium in any case, but runs the risk of delivery of the underlying asset. From this example we can derive the classical definition of futures contract.
Futures or futures contract (futures) is a derivative financial instrument, the standard fixed exchange contract of purchase and sale of the underlying asset, concluding that the parties stipulate only the price level and indicate the date of delivery of the underlying asset, without incurring any obligations to the exchange until then, until the time of execution of futures.
On each exchange, Futures trading, there are different requirements for futures contracts, which may include not only the procedure of delivery and the date, but also the quality of the product and its quantity. Futures contracts can last a few months, and reach more than three years.
