trader futures

Futures or futures contract is a contract which contains a full description of the conditions of purchase or sale of a standard quantity of a specified commodity at a predetermined date in the future, but at the statutory today the price. The goods, which is the futures contract is called the underlying asset. It is important to note, that in the time of the conclusion of the futures contract there is no transfer of the underlying asset or payment for it. It is necessary to pay only the margin, i.e. the necessary for the conclusion of a futures contract is cash Deposit.
For example, a jeweler want to buy gold for the manufacture of crowns, which he plans to produce three months. If he buys a gold now, the problem of its storage. At the same time, the price of gold can grow. In this case, taking into account the possibilities of the futures contract, the jeweller buys on the stock exchange futures on gold at the current price, the delivery of which will be implemented later, and it is three months later.
Futures contracts are concluded on the stock exchange. Futures trading is based on the real stock prices. The first futures exchange, Chicago Board of trade (CBOT Chicago Board of Trade) - was founded in 1848. Now it is part of the largest exchange group in the world - the Chicago Mercantile exchange (CME, Chicago Mercantile Exchange). Besides it, in the named group includes the new York stock exchange (NYMEX New York Mercantile Exchange) and its subdivision - the new York commodity exchange (COMEX, the Commodity Exchange). You can also highlight Интерконтинентальную commodity exchange (ICE, Intercontinental Commodity Exchange), which includes the new York Board of trade (NYBOT, the New York Board of Trade) and the European exchange (EUREX).
It is worth noting that, in General, less than two per cent of futures deals shall be completed actual delivery of the underlying asset. The majority of futures trader, pursuing speculative trade, earn money, or try to limit financial losses from changes in the price of its assets. In this connection the question arises: who is who in the futures market?
Exchange-broker-trader - this is a simplified scheme of interaction of the basic participants of futures trading.
Knowing the basic functions of the participants of trades in futures, some dwell on the specifics of futures trading. There are three interested parties: the seller, the buyer and their mediator - the exchange. The buyer upon conclusion of a futures contract is obliged to buy the goods within the established term agreements. The seller when concluding the futures contract undertakes to sell the goods within the established term agreements. The mediator (the exchange) acts as a guarantor of implementation of the seller and the buyer of his obligations. Moreover, the two sides should fulfill its obligations in relation to each other in a specific period in the future, for the price, which was set today. Liabilities these are exactly the standard amount of the underlying asset, which corresponds to the same contract.
The standard number (standardization) of the underlying asset, which corresponds to one futures contract is called a contract. For example, a futures contract on the copper is the party of copper in 25 tons, or one contract to the European currency is a purchase or sale of 100 thousand euros. Standardization is needed to ensure that sellers and buyers know exactly the number of the supplied goods. Thus, if sold one futures for copper, this means that it is about 25 tonnes of copper. And futures transactions are exactly on the whole the number of contracts. So, if you want to buy 50 tons of copper, it is a two futures for copper. At the same time we are not able to purchase 30 or 40 tons of copper, i.e. the size of the contract is 25 tons of the underlying asset.
Specified goods
Suppose we make a futures contract on the cars: buy futures for one car (underlying asset) at a price of us $ 10 000 (fixed price) with delivery in December 2010 (the date of execution of the contract). Now ask ourselves the question: whether all the conditions stipulated in this future? Indeed, not all. For example, we have not agreed on a very important part of the brand of the car, which we buy. It's one thing, if marked for the price we get a motor vehicle «Mercedes», and quite another thing, if we put the cars of production of the Volga automobile plant.
Term
Delivery futures contracts are made in a specified period of time - it is called the day of delivery. It is in this period there is an exchange of money for goods. Futures have a finite life time, on the expiration of the last day of trades in futures contracts of the transaction on the date it is already impossible.
Price
The main reason that many of the participants (from farmers to Fund Manager) enter into futures transactions, " the certainty of price, which is fixed in the contract. This price is unchanged under any circumstances. Take, for example, all of the same jeweller, who suddenly decided to engage in agriculture and the cultivation of wheat. Without a futures contract our former jeweler in the period of sowing is very difficult to predict its profit or loss. With this newly baked farmer understands that, at the time of harvest wheat prices may fall so that it would be problematic even cover their costs. But, it is due to futures contracts, the grain may fix the price for your wheat before harvesting. If he is for six months before the harvest on the stock exchange shut futures contact on the sale of their future wheat, thus it assumes the obligation to sell the wheat in the day of the sale at the price, which sets out the time of the transaction. In other words, our hero knows in advance the amount that he will receive for their goods.
Features of futures contracts is in the highest degree of standardization, determined by the exchange on which the share is traded each specific futures. Any futures contract has its own specification. This term is a legal document, which details the specified quantity of goods in one contract, delivery term, extremely accurate description of the goods and the terms of trade. Agree, it is not enough to know only that one contract for the lead implies the delivery of the parties of this metal in 25 tons. A buyer is also interested in other features, for example, the form of ingots, the content of impurities, etc. Specification of the futures
Once again let us denote the information, which is specified in the specification of futures contract, namely: the name of the contract, the underlying asset, type of contract (delivery or settlement), place of delivery (if the futures contract delivery), the size of the contract (the amount of the underlying asset, which falls on one contract), the size and price of one tick (minimum change of the price), the margin required to trade futures), the date of the expiration of the contract (the date when the parties are obliged to fulfill their obligations). Delivery and settlement futures
Depending on the settlement of action for the expiration of the term of the contract allocate delivery and settlement futures. Delivery futures contract is, when on the expiration of the term of the contract is the delivery of the underlying asset. If we know the jeweler (before the re-qualification in a farmer) is deliverable futures contract, he will get bought gold at specified in the specification of the warehouse, three months later, on the day of the expiry of the contract. Settlement futures - that is, when delivery of the underlying asset is not made. On the expiration of the term of the contract (the settlement date), the parties shall only cash payments based on the difference between the current price of the underlying asset and the price of which is specified in the contract.