And the current reality of trading these instruments.

What is a futures in simple words

is a contract for the sale or purchase underlying asset in pre deadlines and at the agreed price, which is fixed in the contract. Futures are approved on the basis of standard conditions, which are formed by the exchange itself, where they are traded.

For each underlying asset, all conditions (delivery time, place, method, etc.) are set separately, which helps to quickly sell assets at a price close to the market.

Thus, for participants in the secondary market, there is no problem finding a buyer or seller.

In order to prevent the buyer or seller from refusing to fulfill obligations under the contract, a condition is made for the provision of collateral by both parties.

Now it is not the economic situation that dictates the price of futures contracts, but they, by forming the upcoming price of supply and demand, set the pace for the economy.

What is a futures or futures contract

(from the English word future - the future), is a contract between the seller and the buyer, providing for the supply specific product, shares or services in the future at a price fixed at the time of the conclusion of the futures contract. The main purpose of such instruments is to reduce risks, secure profits and guarantee delivery "here and now".

Today, almost all futures contracts are settled, i.e. without obligation to deliver actual goods. More on this below.

First appeared on the commodity market. Their essence lies in the fact that the parties agree on a deferred payment for the goods. However, when concluding such an agreement, the price is negotiated in advance. This type of contract is very convenient for both parties, as it allows you to avoid situations where sharp fluctuations quotations in the future will provoke additional problems in setting prices.

• , how financial instruments, are popular not only among those who trade various assets, but also among speculators. The thing is that one of the varieties of this contract does not involve a real delivery. That is, the contract is concluded for the goods, but at the time of its execution, this goods is not delivered to the buyer. In this, futures are similar to other instruments. financial markets which can be used for speculative purposes.

What is a futures contract and what is its purpose? Now we will reveal this aspect in more detail.

“And for example, I want a futures contract for some stocks that are not on the broker’s list,” this is a classic understanding of the forex market.

Everything is a little different. It is not the broker who decides which futures to trade and which not. That decides trading floor on which trading takes place. That is the stock market. Sberbank shares are traded on the MB - a very liquid chip, so the exchange provides the opportunity to buy and sell Sberbank futures. Again, let's start with the fact that all futures are actually are divided into two types:

• Estimated.
• Deliverable.

A settled future is a future that has no delivery. For example Si(futures for dollar-ruble) and RTS(futures on our market index) these are settled futures, there is no delivery for them, only settlement in money equivalent. Wherein SBRF(futures on Sberbank shares) — deliverable futures. It will be the delivery of shares. The Chicago Stock Exchange (CME), for example, has deliverable futures on grain, oil and rice.

That is, by buying oil futures there, they can actually bring barrels of oil to you.

We simply do not have such needs in Russia. To be honest, we have a whole sea of ​​"dead" futures, for which there is no turnover at all.

As soon as there is a demand for deliverable futures for oil on the MB - and people are ready to take out barrels with Kamaz - they will appear.

Their fundamental difference lies in the fact that when the expiration date comes (the last day of circulation of the futures), there is no delivery under settlement contracts, and the holder of the futures simply remains "in the money". In the second case, there is a real delivery basic tool. On the FORTS market there are only a few delivery contracts, and all of them provide for the delivery of shares. As a rule, these are the most liquid shares of the domestic stock market, such as:, and others. Their number does not exceed 10 items. Deliveries on oil, gold and other commodity contracts do not occur, that is, they are calculated.

There are small exceptions

but they concern purely professional instruments, such as options and low-liquidity currency pairs ( banknotes CIS countries, except hryvnia and tenge). As mentioned above, the availability of deliverable futures depends on the demand for their delivery. Sberbank shares are traded on the Moscow Exchange, and this is a liquid chip, so the exchange provides an opportunity to buy and sell futures for this share with delivery. It's just that we, in Russia, do not have the need for such a prompt supply of gold, oil and other raw materials. Moreover, our exchange has a huge number of "dead" futures for which there is no turnover at all (futures for copper, grain and energy). This is due to the banal demand. Traders do not see any interest in trading such instruments and, in turn, choose assets that are more familiar to them (the dollar and stocks).

Who issues futures

The next question that a trader may have is: who is the issuer, that is, puts futures into circulation.

With shares, everything is extremely simple, because they are issued by the enterprise to which they originally belonged. On the initial placement they are bought out by investors, and then they begin circulation on the familiar secondary market i.e. on the stock exchange.

In the derivatives market, it is still easier, but it is not entirely obvious.

Futures is, in fact, a contract that is entered into by two parties to the transaction: buyer and seller. Through certain period time, the first undertakes to buy from the second a certain amount of the underlying product, whether it be shares or raw materials.

Thus, traders themselves are issuers of futures, it’s just that the exchange standardizes the contract they conclude and strictly monitors the fulfillment of obligations - this is called.

• It begs the next question.

If everything is clear with stocks: one supplies shares, and the other acquires them, then how should things be with indices in theory? After all, a trader cannot transfer the index to another trader, since it is not material.

This reveals another subtlety of the futures. At the moment, for all futures, , which is the profit or loss of the trader, is calculated relative to the price at which the transaction was concluded. That is, if after the sale transaction the price began to grow, then the trader who opened this short position will begin to suffer losses, and his counterparty, who bought this futures from him, on the contrary, will receive a profitable difference.

A fixed-term contract is actually a dispute, the subject of which can be anything. For indices, hypothetically, the seller should simply provide an index quote. Thus, you can create a future for any amount.

In the US, for example, futures for the weather are traded.

The subject matter of the dispute is limited to common sense exchange organizers.

Do such contracts make any financial sense?

Of course they do. The same American weather futures depends on the number of days in the heating season, which directly affects other sectors of the economy. One way or another, the market continues to perform one of its main tasks: the accumulation and redistribution Money. This factor plays a huge role in the fight against inflation.

The history of futures

Market futures contracts has two legends or two sources.

• Some believe futures originated in the former capital Japan city Osaka. Then the main traded "instrument" was rice. Naturally, sellers and buyers wanted to insure themselves against price fluctuations, and this was the reason for the emergence of such contracts.
• The second story says, like most other financial instruments, the history of futures began in the 17th century in Holland when Europe was overwhelmed tulip mania". The bulb was worth so much money that the buyer simply could not buy it, although some part of the savings was present. The seller could wait for the harvest, but no one knew what it would be like, how much it would have to sell, and what to do in case of a crop failure? This is how deferred contracts came about.

Let's take a simple example . Suppose the owner farming engaged in cultivation wheat. In the process of work, he invests in the purchase of fertilizers, seeds, and also pays for the work of employees. Naturally, in order to continue, the farmer must be sure that all his costs will pay off. But how to get such confidence if you cannot know in advance what the prices for the crop will be? After all, the year may turn out to be fruitful and the supply of wheat on the market will exceed demand.

You can insure your risks with the help of futures. The farm owner can conclude after 6 or 9 months at a certain price. Thus, he will now know how much his investments will pay off.

This is the best way to insure price risks. Of course, this does not mean that the farmer unconditionally benefits from such contracts. After all, situations are possible when, due to a severe drought, the year will be lean and the price of wheat will rise significantly higher than the price at which the contract was concluded. In this case, the farmer will not be able to raise the cost, since it is already fixed under the contract. But all the same, it is beneficial, since the farmer has already included his expenses and a certain profit.

It is beneficial for the buyer as well. After all, if the year is lean, the buyer of the futures in this case will save significantly, since the spot price of raw materials (in this case, wheat) can be significantly higher than the price of the futures contract.

A futures contract is an extremely significant financial instrument used by most traders in the world.

Translating the situation to today's rails and taking as an example Urals or Brent , a potential buyer turns to the seller with a request to sell him a barrel with delivery in a month. He agrees, but not knowing how much he can earn in the future (quotations may fall, as in 2015-2016), he offers to pay off now.

The modern history of futures dates back to 19th century Chicago. The first commodity for which such a contract was concluded was grain. Initially, farm owners brought grain or livestock to Chicago and sold it to dealers. At the same time, the price was determined by the latter and was not always beneficial to the seller. As for the buyers, they faced the problem of delivery of goods. As a result, the buyer and the seller began to do without dealers and conclude contracts between themselves.

What is the scheme of work in this case? She could be next - the owner of the farm was selling grain to a merchant. The latter had to ensure its storage until its transportation became possible.

The merchant who purchased grain wanted to insure himself against price changes (after all, storage could be quite long up to six months or even more). Accordingly, the buyer went to Chicago and entered into contracts with a grain processor there. Thus, the merchant not only found a buyer in advance, but also ensured an acceptable price for grain.

Gradually, such contracts gained recognition and became popular. After all, they offered undeniable benefits to all parties to the transaction.

For example, a grain buyer (merchant) could refuse to buy and resell his right to another.

As for the owner of the farm, if he was not satisfied with the terms of the transaction, he could always sell his obligations for delivery to another farmer.

Attention to the futures market was also shown by speculators who saw their benefits in such trading. Naturally, they were not interested in any raw materials. Their main goal is to buy cheaper in order to sell more expensive later.

Initially, futures contracts only appeared on grain crops. However, already in the second half of the 20th century, they began to be concluded on live cattle. In the 80s, such contracts began to be concluded on precious metals , and then on stock indices.

During the development of futures contracts, there were several problems that needed to be solved.

• First, we are talking about certain guarantees that the contracts will be executed. The task of guaranteeing is undertaken by the exchange where futures are traded. Moreover, development proceeded in two directions. Special stocks of goods and funds were created on the stock exchanges to fulfill obligations.
• On the other hand, the resale of contracts became possible. Such a need arises if one of the parties to the futures contract does not want to fulfill its obligations. Instead of giving up, she resells her right under the contract to a third party.

Why is futures trading so widespread? The fact is that goods carry certain restrictions for the development of exchange trading. Accordingly, in order to remove them, contracts are needed that will allow working not with the product itself, but only with the right to it. Under the influence of market conditions, the owners of the rights to goods can sell or buy them.

Today, transactions in the futures market are concluded not only for goods, but also for currencies, stocks, and indices. In addition, there are a huge number of speculators here.

The futures market is very liquid.

How futures work

Futures, like any other exchange asset, has its price, volatility, and the essence of traders' earnings is to buy cheaper and sell more expensive.

When a futures contract expires, there may be several options. The parties remain with their money or one of the parties makes a profit. If by the time of execution the price of the goods increases, the buyer receives a profit, since he acquired the contract at a lower price.

Accordingly, if at the time of execution the value of the goods decreases, the seller receives a profit, since he sold the contract at higher price, and the owner receives some loss, since the exchange pays him a smaller amount for which he bought the futures contract.

Futures are very similar to options. However, it is worth remembering that they provide not the right, but the obligation of the seller to sell, and the buyer to buy a certain amount of goods at a certain price in the future. The exchange acts as a guarantor of the transaction.

Technical points

Each individual contract has its own specification, the main terms of the contract. Such a document is fixed by the exchange. It reflects the name, ticker, type of contract, volume of the underlying asset, time of circulation, delivery time, minimum price change, as well as the cost of the minimum price change.

Concerning settled futures, they are purely speculative in nature. After the expiration of the contract, no delivery of goods is expected.

It is settlement futures that are available to everyone. individuals on the stock exchanges.

Futures price is the contract price for this moment time. This price may change before the contract is executed. It should be noted that the price of the futures is not identical to the price of the underlying asset. Although it is formed based on the price of the underlying asset. The difference between the price of the futures and the underlying asset is described in terms such as contango and backwardation.

The price of the futures and the underlying asset may differ(despite the fact that by the time of expiration this difference will not be).

• Contango— the value of the futures contract before expiration ( expiration of futures) will be higher than the value of the asset.
• Backwardation— the futures contract is worth less than the underlying asset
• Basis is the difference between the price of an asset and a futures contract.

The basis varies depending on how far the expiration date of the contract is. As we approach the moment of execution, the basis tends to zero.

Futures trading

Futures are traded on exchanges such as FORTS in Russia or CBOE in Chicago, USA.

Futures trading allows traders to take advantage of numerous benefits. These include, in particular:

• access to a large number of trading instruments, which allows you to significantly diversify your portfolio of assets;
• the futures market is very popular - it is liquid, and this is another significant plus;
• when trading futures, a trader does not buy the underlying asset itself, but only a contract for it at a price that is significantly lower than the value of the underlying asset. It's about about the guarantee. This is a kind of collateral that is charged by the exchange. Its size varies from two to ten percent of the value of the underlying asset.

However, it is worth remembering that warranty obligations are not a fixed value. Their size may vary even when the contract has already been purchased. It is very important to monitor this indicator, because if there is not enough capital to cover them, the broker may close positions if there are not enough funds in the trader's account.

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What ? If to speak in simple words, then it is the purchase of various assets, shares and valuable papers. Only here transactions are made not in the present time, as it usually happens, but in the future. The issue of cost is decided in advance, even at the time of the decision to purchase. That is, the concept of "" includes the purchase of assets in a strictly agreed number and at a pre-agreed price. As if it turns out "in the future" by "an agreement in the present." Oh how I turned it.)

What is the point?

In fact, there is nothing complicated in futures trading. The transaction involves two parties - the buyer and the seller. As we already mentioned, there is a basic condition - the cost remains unchanged. What should the seller do? He sells his assets to a buyer on a certain day and for a certain price. What are the responsibilities of the buyer? Buy assets on previously agreed terms. Such a deal must be fixed. All conditions are prescribed in the so-called futures contract, which indicates the name of the asset, quantity, price (per unit) and the exact date of purchase. The meaning of making a profit is simple and clear. For example, you buy for one dollar, and sell for one and a half dollars. But not 50 cents, but much higher, thanks to the leverage. Futures trading opens up opportunities to speculate in more than just currencies and stocks. A market participant has a chance to connect stock indices, gold, and other assets to transactions. Of course, each species has its own trading strategies. Some traders use tried and tested options, while others try to make their own way.

History of futures development in Russia

- Secondly, in the case of futures contracts (options and futures), exchange fees are much lower (when compared with similar indicators on stock market valuable papers); -

third, you can forget about the costs that occur when trading in the market with underlying assets. There are no additional costs associated with the payment of settlement and depositary services. In addition, you save on the use of loans (if any are needed);

- fourthly, getting what you want is no problem. There are no complicated procedures here (as it happens in the spot market with underlying assets). The resulting leverage is much higher, which provides opportunities for more serious earnings. What does it mean? In the futures market, you always have the opportunity, which will be ten times greater than the amount of funds in the account. In the case of underlying assets, leverage is not so impressive.

What are the disadvantages of futures trading? They, as life shows, are also available:

- firstly, trading with large leverage is a rather dangerous undertaking. On the one hand, you can get rich at one moment, and on the other, you can be left without “pants”. With the wrong choice trading strategy you lose everything;

- Secondly, futures contracts cannot be operated on indefinitely - they have a circulation time limit. For example, you are sure that the value of the underlying asset will increase. The natural step is to buy it with maximum leverage. This situation looks like. As a result, a high market position will not allow you to go for expiration. What happens when a futures contract is due? There is no money to fulfill their obligations, so they will have to buy contracts bought earlier. The result is a loss of position. Prices, of course, can go according to your plan, but, alas, the market is no longer available. Of course, you can "play" with the timing of the contracts, but the risk is very high.

Futures trading is an interesting direction, but it requires a certain knowledge base and start-up capital. Good luck.

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Futures (or futures contract) is one of the types of derivative financial instruments (derivatives). In this case, the term "derivative" means that the price of this instrument will be correlated with the price of a certain commodity (oil, gold, wheat, cotton, etc.), which will form the basis of the contract and be the base one. As a rule, transactions with derivative instruments are made not to acquire the underlying asset, but to profit from an increase or decrease in the price of it (only a little more than 1 percent of all futures transactions end in a real delivery of goods).

Futures trading is based on the condition of future delivery. Hence the name of this derivative: "futures" - from the English. "future". Thus, by buying a futures contract, you are agreeing to pay the price today for a commodity that you will receive in the future. This is the main difference between the futures market and the cash market, in which you receive your goods immediately after paying for its current market value.

An excellent explanation of the concept of futures is provided in Todd Lofton's book Futures Trading Fundamentals:

“Suppose we live in the agricultural state of Iowa. I breed big cattle and you grow corn 15 miles from me. Every fall, when your corn is ripe, you bring the whole crop to me and I buy it to feed the steers. In fairness, we agree that I will pay you for the corn at the Chicago Mercantile Exchange price on the day of delivery. Corn is important to both of us. This is your main crop, at the same time corn is my main cost for feeding livestock. I hope for low prices. You've been praying all summer that something, such as a sudden Russian grain purchase, will push up the price of grain.One spring day you come to me with a proposal: “Let's set the price of corn for next fall now, and choose a price that will allow each of us to make a reasonable profit and agree on this. In that case, neither of us would have to worry about what prices will be in September. We will be able to plan better and run our business without worrying about the price of corn.” I agree and we agree on a price of $3.00 a bushel. Such an agreement is called a forward contract. A “contract” is because it is an agreement between a buyer and a seller, and a “forward” is because we plan to make the actual transaction at a later or future time.

This is a good idea, but not without flaws. Suppose the Russians suddenly announce a huge purchase and the price of corn rises to $3.50. You will begin to think how to terminate our contract. Likewise, I wouldn't be too eager to honor our agreement if the bumper crop brings corn prices down to $2.50 a bushel. There are other reasons why our forward contract may not be fulfilled. A storm can destroy your entire corn crop. I can sell my ranching business and the new owner won't feel bound by our agreement. Any of us can go bankrupt.

Futures contracts were invented to eliminate the problems not covered by forward contracts while retaining most of their benefits. A futures contract is the same as a forward contract, but with some additions.

To the additions that Todd Lofton spoke about is the standardization of contracts - standard volumes, delivery times, quality requirements. In the course of exchange trading, only the price is determined. You can buy or sell goods at any time. Thus, sellers and consumers of goods can sell the goods at the moment when the price seems acceptable to them, and can get rid of the goods at any time if conditions have changed. This enables professionals to hedge the risks associated with their activities - this is the main purpose of futures contracts.

But, because of the tendency of a person to earn money always and everywhere, when any market appears, speculators appear on it. Speculators do not need anything, they do not need a real supply. Their goal is to buy low and sell high. Futures markets with their exchange centralization, transparency and high quality brokerage services, liquidity and a wide range of instruments provide excellent opportunities for online trading and investment.

What is the difference between futures trading and Forex / Forex

Futures trading is similar to online Forex trading. Futures markets use the same principles of fundamental and technical analysis, the same stop and limit orders, indicators, charts, financial news etc. Any Forex trader can switch to futures trading, but given some of the features of futures trading. Despite the fact that the futures / Futures market is so similar to the forex market, according to statistics, 90% of traders working in the futures markets earn money, while according to the same statistics, 90% FOREX market I lose them. What is the question here.

The answer is simple:

• Undeniable advantage exchange market over OTC;
• More advanced trade clearing system;
• Unified stock quotes;
• Lower costs;
• The best conditions for trading;
• Most Better conditions for intraday trading;
• Good attitude towards the client.

The undeniable advantage of the exchange market over the over-the-counter. Internet trading in currency futures has a number of advantages over the forex / forex market. It is for this reason that experienced traders often prefer forex trading to futures. Clearing on futures occurs centrally, and only on the exchange where the given contract is traded. Orders to the broker are given through trading terminal client, the broker, in turn, always redirects the client’s order to the exchange, the transaction is docked on the exchange this client with the opposite transaction of another client, after that the client's transaction appears open in his terminal. When trading electronic futures contracts, the client's terminal is directly connected to the broker's server, which is connected to the exchange's electronic system. Clearing is automatic and takes a fraction of a second.

Everything is clean and transparent! All transactions of clients are docked centrally, through the exchange. For example, if a client buys a futures contract for any instrument and the chicken goes down, then this client incurs losses, which means that another client who sold this futures to him receives the same profit. The exchange and the broker do not earn on the loss of the client, and even theoretically this is impossible. The earnings of the broker and the exchange are commissions, and since the number of client transactions is huge, the minimum commission for the client becomes for them good income. Neither the exchange nor brokers are interested in the client playing, since the more clients make transactions, the more profitable it is for exchanges and brokers. Against, exchanges and brokers are interested in order for clients to earn and make as many transactions as possible and provide all the conditions for this - constant improvement of terminals, improvement of the clearing system, introduction of new types of orders, etc.

It is very important that the system itself, even theoretically, does not allow the broker to work against the client. Experienced Traders around the world understand this and give their preference to futures trading.

More advanced trade clearing system. In order to increase the quality and speed of execution of client orders electronic system The clearing of the exchange is constantly being improved. With the brokerage house Water House Capital at the moment, when trading any liquid (high volume of sales) futures, it is possible to open - close a position within a second.

On futures, a transaction is opened instantly and at the current price at the time the signal is received by the exchange. Thus, if the price has become the best for the client, the position will be opened on it. If there is a strong movement, then the transaction will be opened instantly and executed almost at the current price, which means the complete absence of requotes characteristic of the Forex market, when, with a strong market movement, the client is invited to open a position at a new price, which can be a decent amount.

Unified stock quotes. In the forex market, dealers can potentially play quotes against a client, each dealer has different quotes because they use different quote providers. In the futures market, both the divergence of quotes among clients and the ability of the broker to play against the client are completely absent, since the futures market is centralized on the exchange. Quotes are formed automatically, according to the receipt of applications from clients. Clients themselves form futures quotes by their transactions. Because of this, all brokers in the terminals have the same quotes for futures. This is an undeniable advantage over forex.

Lower costs. Unlike Forex, there is no fixed spread on futures, there is a floating BID / ASK difference, which is formed by the clients themselves, depending on their orders. On liquid futures, this difference is usually minimal and does not exceed 1 pip. The broker's commission is assigned to the client individually and depends on the number of transactions, with a small number of transactions, the commission is usually equal to the spread for a similar Forex currency pair, with a large number of transactions - much lower.

The best conditions for trading. On electronic futures, there are no restrictions on placing pending orders by distance from the current price. You can place pending orders at any distance from the market. For clients who work intraday, the margin on open positions is 2 times lower than usual, and for some of the most popular futures contracts, the margin may be even lower.

The best conditions for intraday trading. Trading electronic futures is the best suited for intraday trading. As mentioned above, the electronic clearing system is so perfect and perfected that it allows almost instant matching of clients' transactions, which cannot be said about the capabilities of a dealer, who needs much more time to match client's transactions through the bank with opposite transactions. No dealer can afford to allow clients to make trades holding positions for less than 1 minute - during this time he will not be able to physically match the deal through the bank and the trader's profit will become a loss for the dealer. Electronic futures are most suitable for . Scalpers are also provided with minimal commissions, since it is beneficial for the broker when the client makes a large number of transactions.

You can add to the above that in the futures market the broker's attitude towards the client is the best, because the broker only earns when the client wins, his accounts grow with the growth in the volume of transactions. The broker earns only on commissions from the client's trades and even theoretically cannot make a profit when the client loses. Brokers and exchanges are interested in the client earning, and provide all possible conditions for this.

We recently reviewed the topic. As you know, an option is a contract that gives its buyer the right to deal with an asset within a specified period at a set price. The difference between futures contracts and options is that the transaction for the buyer of the futures is obligatory in the same way as for the seller. In this article, I will talk about the basic concepts of futures trading.

Basic Concepts of Futures Contracts and Examples

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A futures contract (or simply futures) is a contract under which the buyer undertakes to buy and the seller undertakes to sell some asset by a certain date at a price specified in the contract. These contracts are classified as exchange-traded instruments as they are traded exclusively on exchanges under standardized specifications and trading rules. Counterparties stipulate only the price and the date of execution. All futures can be divided into 2 categories

• Deliverable;
• Estimated.

Deliverable futures involve the delivery of an asset on the date the contract is settled. Such an asset can be a commodity (oil, grain) or financial instruments (currency, shares). Settled futures do not involve the delivery of an asset and the parties only make cash settlements: The difference between the contract price and the actual price of the instrument on the due date. A more detailed classification of futures is based on the nature of the assets: commodities or financial instruments:

Initially, futures arose as deliverable commodity contracts, primarily for products Agriculture: in this way, suppliers and buyers sought to protect themselves from the risks associated with poor harvest or storage conditions. For example, the world's largest Chicago Mercantile Exchange CME (Chicago Mercantile Exchange) was established in 1848 specifically for trading agricultural contracts. Financial futures appeared only in 1972. Even later (in 1981), the most popular futures for the S & P500 stock index appeared today. According to statistics, only 2-5% of futures contracts end with the delivery of an asset. At the forefront are such tasks as hedging transactions and speculation.

Each futures has a specification, which can include:

• name of the contract;
• type (settlement or delivery) of the contract;
• contract price;
• price step in points;
• circulation period;
• contract size;
• unit of trade;
• month of delivery;
• date of delivery;
• trading hours;
• delivery method;
• restrictions (for example, on contract currency fluctuations).

During the time before the execution of the futures contract, the spot price of an asset can be either higher or lower than the contract price, depending on this, there are states of the futures called contango and backwardation.

• Contango– a situation in which an asset is traded at a lower price than the futures price, i.e. the participants in the transaction expect the price of the asset to rise.
• Backwardation– the asset is traded at a higher price than the futures price, i.e. participants in the transaction expect a price reduction.

The difference between the futures price and the spot price of an asset is called basis futures contract. For example, in the case of contango, the basis is positive. On the day of delivery, the futures and spot prices converge up to the cost of delivery, this is called convergence. The reason for convergence is that the asset storage factor ceases to play a role.

In the case when there is a consistent decrease in the basis of the futures contract, the dealer can play on this. For example, buying grain in November and simultaneously selling futures for delivery in March. When the delivery date arrives, the dealer sells the grain at the current spot price and at the same time makes the so-called. offset deal at the same price, buying back the futures. Thus, hedging price risk through futures allows you to recoup the cost of storing goods. Just like other exchange instruments, futures allow you to use traditional methods technical analysis. For them, the concepts of trend, support and resistance lines are valid.

Margin and financial result of the futures contract

When opening a transaction with a futures contract, the insurance provision called the deposit margin is blocked on the account of each of its participants. It usually ranges from 2 to 30% of the contract value. After the transaction is completed, the deposit margin is returned to its participants. Sometimes there are situations in which the exchange may require you to deposit additional margin. This situation is called.

It is usually associated with . If the participant of the transaction does not have the opportunity to deposit additional margin, he is forced to close the position. In the event of a mass closing of positions, the price of the asset receives an additional impulse to change. For example, when mass closure long positions, the price of an asset may fall sharply. On the FORTS market, the guarantee margin for deliverable futures increases 1.5 times 5 days before execution. If one of the parties refuses to comply with the terms of the contract, the blocked amount of the collateral is withdrawn as a penalty and transferred to the other party as compensation. Execution control financial obligations participants in the transaction is carried out by the clearing house.

In addition, daily at the close of the trading day, a variation margin is accrued on an open futures position. On the first day, it equals the difference between the price at which the contract was concluded and the closing price of the day (clearing) for this instrument. On the day the contract is executed, the variation margin is equal to the difference between current price and the last clearing price. Thus, the result of the transaction for a particular participant is equal to the sum of the variation margin accruals for all days while the position under the contract is open.

The financial result of the transaction is BM1 + BM2 + BM3 = 600-400 + 200 = 400 rubles.

If the futures are settled and are purchased with a speculative purpose, as well as in a number of other situations, it is preferable not to wait for the day of its execution. In this case, the opposite transaction is concluded, called offset. For example, if 10 futures contracts were previously bought, then exactly the same number must be sold. After that, the obligations under the contract are transferred to its new buyer. On the New York commodity exchange NYMEX (organizationally part of the CME) reaches the delivery of no more than 1% of open positions for the WTI brand. An important difference between a settled future and a delivery future is that open position settlement futures there is no increase in the guarantee margin on the eve of execution. The final price on the day of execution is formed on the basis of the spot price. For example, in the case of gold futures, the London fixing on COMEX (Commodity Exchange) is taken.

Futures and CFDs: Similarities and Differences

The arithmetic of calculating profits when trading settled futures resembles a popular class of derivatives called CFD ( contract for Difference, contract for difference). By trading CFD, a trader earns on the difference between the prices of an asset at closing and opening trading position. Shares can be an asset stock indices, commodities at spot prices, actual futures, etc. The main similarities and differences between futures and CFDs can be summarized in a table:

Unlike futures, CFDs are traded with forex brokers along with currency pairs, but not around the clock, but at hours trading sessions on the relevant exchanges dealing with specific underlying assets. One of the most liquid futures contracts traded in Russian system FORTS, - futures on the RTS index. It is listed as a CFD on the investing.com/indices/rts-cash-settled-futures quotes streaming chart.

However, it is important not to confuse an exchange-traded instrument with an over-the-counter instrument. The fundamental difference between them is that the price of an exchange instrument is determined by the balance of supply and demand during trading, while dealing centers only allow you to bet on the rise or fall of prices, but not influence it. Among the most liquid futures contracts, first of all, futures for stock indices and oil should be mentioned. On the American exchanges Dow Jones and S&P500 futures are traded on the Chicago Mercantile Exchange, while oil futures are traded on the New York Mercantile Exchange NYMEX.

The most popular futures on the Moscow Exchange are for the RTS index (30% of the total turnover of futures trading) and for the US dollar - ruble pair (60% of the turnover). According to the specification, the contract price for the RTS index is equal to the value of the index multiplied by 100, and the cost of the minimum price step (10 points) is $0.2. Thus, today the contract is traded above 100 thousand rubles. This is one of the reasons why non-professional traders choose the more affordable CFDs.

For example, for the minimum lot for CFD RUS50 (designation RTS index) is equal to 0.01, and the price of 1 pip is $10, so with a maximum leverage of 1:25 a trader can trade the index with $500 in his account. In total, CFDs on 26 index and 11 commodity futures are available to the company's clients. For comparison, the largest in Russia offers CFD trading only 10 index and 3 commodity futures.

There are exchange commodities for which the concept market price has no direct economic justification. First of all, it is oil. The first futures transactions in the oil market were made in the early 1980s. But in 1986 the Mexican oil company PEMEX pegged spot prices to futures prices for the first time, which quickly became the standard.

With global oil production of all grades less than 100 million barrels per day, on the London site of ICE Futures Europe, an average of about a million futures contracts for Brent oil alone are concluded per day. According to the specification, the volume of one contract is 1,000 barrels. Thus, the total volume of oil futures traded on this one platform is approximately 10 times higher than the global oil production. Small (about 1 million barrels or less) changes in US WTI crude stocks are not able to affect supply, but lead to futures trading. On November 29, 2016, trading in futures for Urals oil was launched on the St. Petersburg International Commodity Exchange (SPIMEX).

Futures on Urals is deliverable, focused primarily on exports, but Russian companies. The volume of the delivery lot is 720,000 barrels. According to the plan of the Ministry of Energy of Russia, these auctions are designed to reduce the discount of the Urals brand relative to Brent, which averages $2, but sometimes rises to $5 and more. The target level for trading volume at the end of 2017 is set at 200 thousand contracts per month, while at the moment no more than a few dozen contracts are concluded per day.

In this article, I did not try to cover all aspects of futures trading on the stock exchange. Specific typical situations and methods of trading them are a separate big topic that is unlikely to be of interest to novice investors. However, if there is a mutual interest of readers, I can consider the topic in more detail.

All profit!

At the moment, from a technical point of view, trading in any of the major markets (stock, currency, futures, options) is practically the same. Sending orders to buy / sell something is carried out through special programs (trading platforms) and is almost the same for each market. So purely technically, the transition from one market to another does not present any difficulties. But in terms of the complexity of analysis and the competitiveness of a single trader, the markets differ very significantly.

In the last article, we got acquainted with all the main parameters by which you need to choose one or another market segment for yourself. Now let's look at these parameters of the markets, which most often come to trade through electronic trading.

Markets will be considered in terms of complexity and liquidity in ascending order. the more liquid the market, the more professionals there are and the more difficult it is to make money there.

Stock market

Least liquid compared to the rest. Also with the lowest average trading volumes compared to futures, foreign exchange or options. As a result, it is the easiest in terms of competition, so it is better to start studying the financial industry and trading from this particular market. opportunities for beginners in this market are the most.

The largest is the US stock market (NYSE and NASDAQ stock exchanges). For example, in 2015, the total market capitalization of companies traded on the New York Stock Exchange was $25.3 trillion. According to various sources, the average daily trading turnover is about $ 60 billion.

• Market Structure

Usually centralized and regulated government bodies(there are also over-the-counter little regulated platforms, but few people know about them and usually few people trade there). As a result, the interests of market participants are protected much more than, for example, in the foreign exchange market.

It is also considered the most open market because Regulators try to make information about companies, transactions and participants as open as possible to the public in order to reduce manipulation and fraud. This also has a positive effect on competitiveness. in fact, all market participants receive all information at the same time, regardless of their location, level and amount of funds (we will omit HFT and manipulations due to insider information).

For example, stocks of more than 15,000 companies are traded on the US stock market. Among this set, there are both completely illiquid shares and very liquid ones, which allows us to be very flexible in choosing for ourselves exactly those in which we will have the greatest competitive advantage. In terms of the number of tools for trading, the stock market is the largest among all the others.

• Entry threshold and costs

You can start trading stocks with even 100 USD in your pocket. It all depends on the time frame of trading and the desired financial results. On small capital you can receive leverage risking only their own funds. For example, there are special accounts (in a proprietary trading firm) where you can deposit as little as 1,000 USD, while trading with the company's funds in excess of 100,000 USD. There are so many types of companies other than brokerage companies through which you can enter the market. The same prop companies are professional, registered in New York or Chicago, having regulation and licenses, and there are non-professional ones operating through offshore companies. In general, there are opportunities for any capital.

The costs consist of brokerage commissions, payment of quotes and trading platform, as well as commissions to various regulators and ECN systems. If everything is standardized according to ECN systems and regulators, then brokerage commissions are very different in different regions and companies. The average normal brokerage commission for a typical trader is $3 for every 1000 shares traded. Intermediaries usually charge more than $4-5 for every thousand ($0.005 for 1 share or 50 cents for 100 shares - they write differently, but it's all the same).

You can get a good commission if you join a group. For example, in my case, this commission is only 20 cents for each 1000 shares traded (if someone wants to get the same low commission and join the group, please contact me, I can help)

• Volatility

Due to the fact that the stock market is the least liquid among others and has both illiquid and liquid instruments, the volatility on it is the highest. Here you can find both very volatile instruments with high potential income and risk, and low volatile ones.

Futures market

• Liquidity and Average Trading Volumes

The second in terms of liquidity and volumes after the stock one and, as a result, the second in complexity.

• Market Structure

Centralized and regulated by the state. bodies.

• Number of traded instruments

Basically, futures for various raw materials, indices, currencies and bonds are traded. If we also include exchange spreads, then the total number of instruments will be within 1000.

• Entry threshold and costs

If we take the Chicago Stock Exchange (CME), then the entry threshold is determined by the size minimum position in terms of the cost of 1 point of price change. For example, if you take a future for gold, then 1 point of gold price change with a minimum position volume of 1 lot will be equal to $10. As a result, it will not be possible to start trading with an account of 100 or 500 USD. at the first unsuccessful transaction, there is a risk of quickly losing all the money. From the point of view of risks, using the example of the Chicago Stock Exchange, it makes no sense to start trading futures with less than 10,000 USD.

The costs are mainly brokerage commissions. There are free trading platforms, but there are also paid ones, the cost of which can reach 2000 USD per month. For beginners, the futures market is not a very suitable option.

• Volatility

Basically, the liquidity of futures is quite high, so their volatility is many times less than the volatility of stocks in the stock market. Therefore, there is much less opportunity for profit for small capital in this market.

foreign exchange market (forex,forex)

• Liquidity and Average Trading Volumes

It is considered the most liquid market in the world and the largest in terms of volume, except for derivatives such as options.

On average, the daily turnover of the Forex market is more than $6 trillion, of which 5% is the turnover of individual speculators. Due to such a large liquidity, small capital cannot compete with prof. participants in this market. The main participants in the foreign exchange market are big banks and funds. Their main income comes from spreads and differences in interest rates different countries. Income in % in relation to capital is units of percent per year. Therefore, there is no point in entering this market with a capital of less than 100,000 USD.

• Market Structure

The market is decentralized and consists of many competing sites around the world. As a result, this is the most closed market in which all information is closed. in any case, it cannot be complete. For small speculators and investors, there is no protection and guarantees, which carries increased risks. From the point of view of competitiveness, this is a very big disadvantage.

• Number of traded instruments

Less than 500. Only currencies of different countries are traded.

• Entry threshold and costs

Since the market is not regulated, there are many intermediaries and scammers. Internal clearing (kitchen) is very common, which allows clients to trade with even 20USD with virtually no cost.

Basically, trading methods intended for the stock market are imposed, which bring temporary results on the currency market, which misleads novice traders about the stability and expediency of using such strategies.

• Volatility

The lowest volatile market. Best Strategy– spreads and market making, which is available only to legal entities. persons with very large capital.

Options.

• Liquidity and Average Trading Volumes

The most liquid market since there are options for currency market both futures and stocks.

• Market Structure

Depends on what options are traded on. Options on futures and stocks are standardized, centralized and regulated by the state. bodies. Options on the foreign exchange market are not regulated, decentralized, not standardized and mainly represent exotic types of options (binary for example, which exist exclusively with internal clearing (kitchen)).

• Number of traded instruments

Over 100,000.

• Entry threshold and costs

Depends on what they are trading for. Entry threshold can start from $500 for regulated markets and from $10 for unregulated ones.

• Volatility

It also depends on the underlying asset.

Conclusions:

It is best to start the trader's path from the stock market. on it, a beginner can quite compete with other bidders. More transparent information in the stock market, big choice instruments, any levels of liquidity and volatility for any strategies.

If you do not use leverage and trade only with your own funds, only in the stock market a high percentage yield is possible due to high volatility, which is not achievable for any other market.

The futures and currency markets always use leverage. it would be impossible for speculators to maintain sufficient interest returns on their capital alone. Also, there is a very small selection of instruments for trading on futures and currencies, and during periods of calm in the markets, a small investor will simply have nothing to trade.

The options market is the most extensive and most difficult to understand for beginners. In addition, options are a derivative instrument and without qualitative analysis the underlying asset, they will not bring stable results.

Therefore, you need to move from smaller to larger, not forgetting that your profit is someone's loss, and if you cannot compete with someone, then someone will make a profit at your expense.