Exchange futures trading (basics) video tutorial

In this article I will talk about the features of futures trading and show with an example how they differ from stocks.

How to trade futures

In my video lessons where I talk about trading on your own exchange account, recently, I began to pay more attention to futures speculation. From the questions and comments on the video tutorials, I realized that futures trading is of interest to my readers and subscribers, but is less clear to them than, for example, stock trading. To make it clearer, it is necessary to talk in more detail about the features of this instrument - futures.

Comparison of stocks and futures

Futures are a derivative instrument. The word "derivative" means that this instrument is produced
from another product that is its basis (underlying asset). For example, conditionally, milk is a derivative of a cow, and a cow is an underlying asset.

There are futures for stocks, where the underlying asset is shares, for commodities, where the underlying asset is commodities (oil, gas, gold, etc.), for currencies, where the underlying asset is currencies.

The main and most “delicious” distinguishing feature of futures from stocks is leverage – the ability to trade with borrowed funds. Let me give you an example of investing in futures and stocks.

Practical example of futures and stocks trading

An ordinary share of Sberbank costs 150 rubles. On the stock exchange you can buy a lot consisting of 10 shares for 1,500 rubles. If the share price rises to 160 rubles, your profit will be:

(160 – 150)*10 = 100 rubles, the return on investment will be: (100/1,500)*100=6.66%

An ordinary share of Sberbank is the base asset of the June futures SRM7, the price of which will be approximately 15,000 rubles (corresponding to a share price of 150). But to buy this futures, it is not necessary to have 15,000 rubles in your trading account; 10% of its value (collateral or abbreviated as G.O.) will be enough. The futures guarantee for ordinary shares of Sberbank is 2,068 rubles (set by the exchange arbitrarily). If you have an amount in your trading account that exceeds the G.O. (2,068 rubles), you can buy 1 futures.

The price of ordinary shares of Sberbank increased to 160 rubles, and the futures price approximately increased to 16,000.

Your profit will be: 16,000 – 15,000 = 1,000 rubles. The return on investment will be: (1,000/2,068)*100 = 48.35%

Note! The same amount of investment, but different returns - 6 and 48%

Beware of Futures

The basic postulate of economics is: “The higher the risk, the higher the potential profit should be.” This law also works in the opposite direction.

If you buy 1 lot of Sberbank ordinary shares, you most likely will not lose all your money. You own an asset (share).

By purchasing a futures, you risk losing all your money if its value fluctuates slightly. Leverage allows you to get extra income, but it can destroy your account.

Technical feature of futures

There is one more technical detail that also needs to be discussed. When you buy a share for 160 rubles, the information is entered into the depository that you own a share whose price is 160 rubles. The actual purchase price of a stock changes only in one case - if you buy more of these shares - then the purchase price is calculated using the averaging formula.

Futures pricing follows a different scenario. Let me give you an example.

You have 2,500 rubles in your account. You bought SRM7 futures at a price of 15,000 rubles. G.O. is reserved from the account. – 2,068 rubles, and the balance is: 2,500–2,068 = 432 rubles. The futures price changes during the trading session, but is fixed during intermediate clearing (clearing is carried out at 14:05, 18:50, 23:50 Moscow time).

Suppose the price has increased and, at the time of clearing, is 15,500 rubles - in this case, 500 rubles of profit (called variation margin) is credited to the account. Now the account has grown to: 500+432=932 rubles. But the purchase price has also changed - now it is the last clearing price (15,500 rubles). And, if the price drops to 15,250, the variation margin becomes negative, but, in fact, you are in the black because you bought the futures at a price of 15,000 rubles.

If the futures price decreases to the level: 15,000 – 432 = 14 568 , then your account has dried up, and the broker will require you to urgently deposit funds to secure an open position, or will forcefully close it.

The principle described above explains why the bid or ask price of a futures contract changes with each clearing, and a winning position may appear to be a losing one due to a negative variation margin.

There is only one way out - write down the entry points of your positions and monitor the status of your trading account.

The principle of futures trading

If you use all your funds only to speculate in futures, then most likely you will lose them, because increased risk kills the account over time - it's basic mathematics.

It is wise to place your funds in assets with different levels of risk. For example, put 70% of your funds in a bank deposit, invest 20% in stocks, and leave 10% for futures speculation.

There is also a risk-free investment management scheme, when you put all your funds on a bank deposit, and risk only the accrued interest - you buy futures with this money. If you lose your money, the body of the deposit (the initial investment amount) will remain unchanged. This scheme reduces the level of potential profit, but guarantees the safety of your funds.

The opportunity to invest your funds in stock trading thanks to the Internet has become available to everyone who is interested in this type of earnings. Anyone who has the necessary knowledge and means to do so can try their hand at this business. The services provided by brokerage houses allow you to start earning money without significant financial investments. Here we will consider the option of futures trading, the distinctive features of this financial instrument, as well as what those who are taking their first steps in this field should pay attention to. may seem difficult, but you can always learn.

Futures - what is it in simple words?

This is a transaction where two parties agree in advance on the price of a product at a certain point in the future. Usually, thanks to such contracts, market participants insure themselves against possible financial costs; such operations allow them not to pay the entire amount under the contract at once, but only make the necessary deposit as a guarantor of a future transaction; it depends on the conditions of the exchange and can amount to up to one fifth of the total cost .

For example: The parties agree on the price for a certain product in one month, and at the moment called expiration, they are obliged to fulfill their obligations regardless of what the price will be at the end of the transaction. If the price turns out to be higher than previously agreed upon, then the buyer wins and therefore makes a profit. In the opposite case, the transaction will be beneficial for the seller.

There are a lot of tools for concluding deals; let’s look at some of them and determine the differences.

What is the difference between forward and future, option and future?

A forward contract is not an exchange transaction entered into by persons interested in buying or selling a specific product. Basically, these contracts are concluded by organizations that are interested in the actual supply of certain goods. Futures contracts are different in that they are concluded according to the rules of the exchange, they do not require mandatory delivery of goods, their volumes are standardized and determined by the number of lots. The settlement for such transactions is the payment of the price difference, so futures are often used to make a profit.

Difference between forward and futures

An option contract is another financial instrument, using which the investor acquires the right to make a transaction, while the seller of the option is obliged to carry it out on pre-agreed conditions; the buyer himself decides to exercise his right or refuse. Thus, the main difference from futures is the difference in rights and responsibilities between the buyer and seller.

Using futures as a trading tool, players on the exchange make a profit due to the difference in price; you can work on sites that provide opportunities for using this financial instrument:

• In Russia this is the FORTS platform.
• Exchanges of America and Asia.
• European brokerage companies.

The main key to success in this earning is an understanding of price formation and the ability to predict its movement in the future. Therefore, you need to thoroughly know the essence and laws of the market in which the trader plans to begin his work.

To achieve success you need:

• Funds for trading on the stock exchange must be invested based on your capabilities, It is not advisable to use borrowed funds, or at the first stage of work an amount the loss of which could cause a significant blow to your budget.
• Choosing a broker, a very important point on which success depends. Unfortunately, there are often companies on the market whose main goal is to enrich themselves at the expense of their clients’ deposits, instead of fulfilling their obligations in good faith. Such supposedly brokerage organizations are called “kitchens”. A good broker provides his clients with services for working on trading platforms and makes a profit through commissions; he is interested in increasing the volume and quality of his client’s transactions, which means increasing his account; such a broker is always committed to long-term cooperation.

How to choose a broker

What criteria should be used to determine reliability:

1. Time of existence and history, for the Russian market is at least ten years, there are rare exceptions, but it is better not to take risks.
2. The activities of a brokerage house must be regulated by the laws of the country in which it operates and not run counter to international law. The agreement concluded between the broker and the trader must be completely clear. It should not contain points that can be interpreted differently. Withdrawal of earned money is carried out in compliance with concluded agreements and without violating deadlines.
3. The broker provides a trading terminal that is convenient and user-friendly; it must correctly reflect quotes in real time and quickly respond to market changes.
4. Technical support must be provided in a language that the client understands, and must also be available throughout the trading period and promptly respond to the client’s requests, regardless of the size of his account.
5. A good broker, as a rule, provides the client with the opportunity for technical and fundamental analysis on its website.

For beginners, it is advisable to have the opportunity to work with a virtual account, which allows you to make transactions in real time using virtual money, this allows you to develop skills and create your own strategy, without the risk of losing your own funds.

The article is not mine, but it will be very useful for those who want to understand the basics of futures trading. I made only minor edits and a comment at the end.

What you need to know

What do you need to know before you start trading futures so that you don’t foolishly lose money, not bring the transaction to real delivery and not ruin your relationship with the broker? Where to start if you want to work in the international derivatives market? Where can I find the information I need?

Let's look at the entire process that begins with an uncontrollable desire to invest in a specific commodity asset and ends with a transaction, using the example of one of the actively traded futures contracts. For the sake of example, we will assume that a beginner has decided to invest in gold, but all the reasoning and algorithms given below will be relevant for other derivatives market instruments, be it oil, platinum, beef, wheat, timber, coffee, and so on.

So, first of all, we find out the ticker of the instrument. To do this, we go to the exchange website - with 99% probability, the required instrument will be found either on CME (www.cmegroup.com) or on ICE (www.theice.com), these are the two largest exchange holdings. Look at the “Products” section or menu item. On the CME website in the menu we find the desired subsection “Metals”, where in the “Precious” column we see the gold futures “GC Gold”. On the page dedicated to gold futures that opens, we find a link to the contract specification - “Contract Specifications”, which we will need more than once. This table summarizes all the basic universal data on the futures, including the ticker, it is in the “Product Symbol” line - GC.

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Next, we need to find out which futures with delivery in what month is now the most liquid - after all, as you can see in the “Listed Contracts” specification line, more than 20 gold contracts with different delivery dates are traded in parallel. In order to find the most actively traded one, let's go to the "futures" section on the BarChart website. This site is good because, in addition to the months, it immediately shows their stock symbol. On the left we find the “Metals” section we need, select the first line “Gold” in the table that opens.

After this, we will see all 20 “gold” contracts quoted for 5 years in advance. We need the “Volume” column, where we find the largest volume. If the volumes of two neighboring months are almost equal, then we choose the distant one, since this means that there is a process of transition from the nearby month to the next. Typically, the most liquid futures are traded for delivery 1-2 months from the current date. In our case, the most active is June 2012. Its full ticker, as can be seen in the first column, is GCM12. That is, M12 is added to the GC stock ticker found in the previous paragraph - the month and year code. The month is always indicated by one letter (full list of 12 characters in calendar order: F,G,H – J,K,M – N,Q,U – V,X,Z). The year in the code is indicated by the last two digits.

Last day of trading and start day of deliveries

The next thing you need to know is the last day of trading and the day the futures deliveries begin. Especially if the delivery will not be in 2-3 months, but already in the current one. Knowing these dates is necessary in order not to be left with a contract in your hands in the last hours of its existence. With this development of events, at best, you will have to close it on an illiquid market with huge spreads, and at worst, you will run into a supply and wonder how to pay for a box of gold bars and where to sell them later.

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You might be interested in reading the transcript.

It is recommended to switch from one contract to another at least several business days before the start of delivery if futures are traded monthly, and one and a half to two weeks in advance if they are traded quarterly. In order to see the dates for the end of trading and the start of delivery requirements (LTD, Last Trading Day and FND, First Notice day), we return to the exchange website, to the specifications page. We find there the “Product Calendar” link, which gives us another table. In it we look at the line corresponding to our financial instrument - JUN 2012 GCM12 - and see that the last day of trading for it is 06/27/11, and the start of requests for delivery is already 05/31/11. Thus, it is necessary to close this contract and open the next one a couple of days before the end of May.

Financial questions

Let's move on to financial issues. We need to determine how many contracts we can purchase based on the amount of funds in our trading account, and whether there will be enough money left there in case the market suddenly goes against us after the transaction. Such settlements in the derivatives market are carried out on the basis of margin collateral.

When opening a position on any contract, an amount is fixed in the account, the size of which is determined by the exchange and changes quite rarely. This amount will become unavailable for use for the entire time we are the owner of the fixed-term contract and will be released immediately after its closure. On the exchange website, huge tables of margins are not very pleasant to read, so we go to the R.J.O’Brien website, where a convenient summary table of margin margins for the most popular contracts is stored (in pdf format). Our GC gold futures are listed on the CMX - COMEX section (this is the part of the CME that historically deals with precious metals). We look at the “Spec Init” column, this is Initial Margin - the initial margin. In gold it is now $10.125. This means that with an account of $15,000 we can operate with only one contract, with an account of $35,000 - no more than three. The next column “Spec Mnt” is the Maintenance Margin, in our case $7,500. If the account falls below this amount (multiplied by the number of contracts available), an angry broker will call (“Hello, Margin Call!”), and you will have to either close the position (i.e., record losses) or promptly deposit additional money into the account ( to a level not lower than the initial margin).

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A break during work

Despite the fact that electronic trading in futures takes place almost around the clock, they have a break in their work. In addition, they are not active at any time of the day. In the specifications on the exchange website, you need to look at the trading hours (line “Hours”), not forgetting to convert them to local time. The GC gold contract is traded with a 45-minute break (16:15 - 17:00 in Chicago; for Moscow the difference is -9 hours).

The most active electronic trading practically coincides in time with classic trading on the exchange floor, which is conducted in the form of an open auction. For gold, trading “on the floor” of the Chicago Exchange takes place on weekdays from 7:20 to 12:30, or from 16:20 to 21:30 Moscow time.

What else might you need?

From the data published in the specification, you can calculate the cost of the minimum price step, the full value of the contract and trading leverage. To do this, we will use the lines “Contract Size” and “Minimum Fluctuation”. The volume of 1 contract for GC gold is 100 troy ounces (approximately 3.1 kg). The minimum price movement is $0.10 per ounce. This means that with a minimal movement in the price of gold in any direction, our account will “quantum” change by $10 (100 ounces * 10 cents). From personal experience, most financial instruments on the derivatives market trade at $5 - $15 per tick. Next, let's look at the dimension of the quote - in the line “Price Quotation” we see that the quote published on the exchange is the price of one ounce of gold in dollars and cents. Currently, one ounce, based on the last exchange transaction on GCM12, is valued at $1672.9 - we can see this and other quotes on the “Quotes” page. The total value of the contract is equal to its volume multiplied by the quotation. This means that the total value of one “gold” futures in your account is $167,290 - more than 167 thousand dollars! By comparing the margin required to trade this contract and its full value, we calculate the leverage - $10,125 to $167,290 - it is approximately 1: 17. For comparison, in the US stock market, leverage is at best 1: 4.

So, now we know how futures are designated, for which delivery month the most active trading is conducted and when it ends, what time of day is best to participate in exchange trading and how much money you need to keep in your account for this. Using the example of a transaction with gold futures, we analyzed almost the entire algorithm for starting trading. In principle, this knowledge is enough to buy and sell any futures contracts in electronic trading in the United States.

To the questions “So, after all, should I buy or sell? and when exactly?” answer fundamental and technical analysis, which is the main topic of hundreds of books on trading. And the last piece of advice for beginners - don’t forget to get an “emergency” telephone number from your broker for the Trading Desk department, which will allow you to urgently place an order or close a deal if Internet access suddenly disappears or the computer with the trading platform fails.
Happy trading!

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My comment

Everything in the article is written in sufficient detail and clearly, but I would like to focus on some issues.

Futures trading is very similar to Forex trading with some differences. There are 4 main features:

1) Futures have an expiration date (delivery date of the commodity). If a transaction on Forex can be held indefinitely, then on the futures market, in a month (or quarter) the trading position will be automatically closed.

2) Swaps are not charged on futures. They are already included in the price of the futures contract itself.

3) Instead of leverage, “collateral margin” is used (this is an analogue of leverage). The collateral may be different for different contracts! Keep this in mind.

4) The cost of a point (tick) in futures can also vary greatly between different contracts.

In all other respects, futures are similar to Forex. Profitable strategies, training, videos - all this is equally applicable in both places.

One of the most common trading platforms for futures trading is quik. Simple - no frills, but suitable for dummies.

By the way, be prepared to pay for the trading platform! Yes Yes! This Forex trading terminal is provided for free...

One of the most popular trading instruments among Russian traders is RTS index futures. There are also currency futures (analogous to FOREX currency pairs).

I also recommend that you familiarize yourself with the specifications (codes) of futures!
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Video on this issue:

Welcome to the Beginner's Guide to Futures Trading. This guide provides a general overview of the futures market as well as descriptions of some of the tools and techniques common to the market. As we will see, there are futures contracts that cover different classes of investments (eg stock index, gold, orange juice). We won't go into detail about each of them.

It is suggested that if you decide to start trading futures after reading this guide, you will spend some time learning about the specific market (that you decide to trade). As with any endeavor, the more effort you put into preparing, the greater your chances of success will be!

Introduction

Futures can be used both to effectively hedge other investment positions and for speculation. This carries the potential for good profits associated with the use of leverage (we will discuss this issue in more detail later). However, let's not forget that using leverage is always associated with increased risk. Before you start trading futures, you must not only prepare as theoretically as possible, but also be absolutely sure that you are able and willing to accept financial losses.

The basic structure of this guide is as follows:

We'll start with a general overview of the futures market, including what futures are and how they differ from other financial instruments. Let's discuss the advantages and disadvantages of using leverage.

The second section provides some considerations before you begin trading, such as how to choose the right brokerage firm for futures trading, the different types of futures contracts, and the different types of trades.

The third section covers futures valuation, including fundamental and technical analysis techniques, as well as software packages that may be useful to you in futures trading.

Finally, in the fourth section of this guide, an example of real futures trading is provided. Step by step we will look at choosing an instrument, analyzing the market and executing a trade.

By the end of this guide, you should have a basic understanding of futures trading, which will allow you to decide whether this type of trading is worth pursuing. And it will provide a good foundation for further study of the futures market if you decide that such trading is right for you.

Basic structure of the futures market

In this section, we'll look at how the futures market works, how it differs from other markets, and how leverage works in it.

How the futures market works

You are probably familiar with the concept of derivative financial instruments (derivatives).

A derivative is a derivative of a financial instrument formed by the movement of its price.

In other words, the price of a derivative (a derivative of the underlying asset) depends on changes in the price of this underlying asset. For example, the value of a derivative related to the S&P 500 is a function of the price movement of the S&P 500. So, a futures contract, at its core, is a derivative.

Futures are one of the oldest derivatives contracts. They were originally designed to allow farmers to hedge against changes in the price of their produce between planting and the time the crop is harvested and brought to market. Thus, many futures contracts focus on things such as livestock (cattle) and grains (wheat). Since then, the futures market has expanded to include contracts related to a wide range of assets, including: precious metals (gold), industrial metals (aluminum), energy (oil), bonds (Treasuries) and stocks (S&P 500 ).

How do futures differ from other financial instruments?

Futures have several differences from many other financial instruments.

First, the value of a futures contract is determined by the movement of something else—the futures contract itself has no “inherent” value.

Secondly, futures have a limited lifespan. Unlike stocks, which can last forever (or as long as the company that issued them exists), a futures contract has an expiration date, after which the contract ceases to exist. This means that when trading futures, market direction and timing are vitally important. Typically, when you purchase a futures contract, you will have several options for when it will expire.

The third difference is that many futures traders, in addition to making outright bets on the direction of the market, use more complex trading, the results of which depend on the relationship of the various contracts to each other (we'll talk about this in more detail a little later). However, the most important difference between futures and most other financial instruments available to individual investors is the use of leverage.

Leverage

When buying or selling a futures contract, the investor does not have to pay for the entire contract. Instead, he makes a small down payment to initiate the position. As an example, let's consider a hypothetical trading of a futures contract on the S&P 500. The value of one point of the contract on the S&P 500 is $250. So, if the S&P level is 1400, then the value of the futures contract is $350,000 ($250 X 1400). But in order to start trading, you only need to make an initial margin of $21,875.

Note: Initial and maintenance margin levels are set by exchanges and are subject to change.

So what happens if the S&P 500 level changes? If the S&P level rises to 1500 (an increase of only 7%), then the contract will already be worth $375,000 ($250 X 1500). In other words, the contract value increased by $25,000 ($375,000 – $350,000 = $25,000). And the investor will put this difference in his pocket with a clear conscience. Thus, with an initial investment level of $21,875, he will earn $25,000 in net profit (profitability of more than 100%). The ability to achieve such large returns, even with a small change in the price of the underlying index, is a direct result of leverage. And it is this opportunity that attracts many people to the futures market.

Let's now look at what could happen if the S&P 500 falls in value. If the S&P fell ten points to 1390, the contract would be worth $347,500 and our investor would have a loss of $2500. Each day, the exchange would compare the value of the futures contract to the client's account and either add profits or subtract losses . The exchange requires an account balance to remain above a certain minimum level, which in the case of the S&P 500 is $17,500. So in our example, the trader would have a paper loss of $2,500, but would not be required to post additional cash to keep the open position.

What happens if the S&P falls to 1300? In this case, the futures contract would be worth $325,000 and the client's initial margin of $21,875 would be wiped out. (Remember that leverage works both ways, so in this case, a little more than a 7% drop in the S&P could result in the investor losing money entirely). In this case, either the investor deposits funds to replenish the margin, or the contract is closed at a loss.

Considerations before trading

Before you start trading futures, let's cover a few important things. First of all, you must decide on the choice of broker, the types of futures you will trade and the type of trading. But first things first.

Choosing a brokerage firm

First of all, you need to decide on the choice of broker. You can choose a full-service broker who will give you a high level of service and advice, but this will likely be quite expensive. Or you can choose a discount broker that provides a minimum of services, but for small commissions. It all depends on your preferences and level of wealth. Probably many readers of this article are private traders and investors for whom a discount broker is the best option.

As always, when choosing a broker, make sure you approach this issue carefully, especially if you have not encountered this “beast” before. Important considerations include commission rates, margin requirements, trade types, software and user interface for monitoring and trading, and quality and speed of customer service.

You can read more about choosing a broker in the article: ““.

Futures Market Categories

If you trade stocks, you know that there are many different industries (e.g. technology, oil, banking). While the mechanics of trading for each industry remain the same, the nuances of the underlying industries and businesses vary widely. It's the same with futures. All futures contracts are similar, but futures contracts track such a wide range of instruments that it is important to be aware of the existing categories. For a better understanding, it is helpful to compare futures categories to industries in the stock market and each stock futures contract. The main categories of futures contracts, as well as some common contracts that fall into these categories, are listed below.

1. Agriculture:

• Cereals (corn, oil, soybeans)
• Livestock (cattle, pigs)
• Dairy (milk, cheese)
• Forest (wood, cellulose)

2. Energy:

• Raw oil
• Heating oil
• Natural gas
• Coal

3. Stock indices:

• S&P 500
• Nasdaq 100
• Nikkei 225
• E-mini S&P 500

• Euro/$
• GBP/$
• Yen/$
• Euro/Yen

5. Interest rates:

• Treasuries (2, 5, 10, 30 year)
• Money markets (eurodollar, fed funds)
• Interest Rate Swaps
• Barclays Aggregate Index

6. Metals:

• Gold
• Silver
• Platinum
• Non-ferrous metals (copper, steel)

You can trade in any of these categories. To start, you may want to consider something that is already familiar to you. So, for example, if you have been trading stocks for many years, you can start your futures trading with stock indexes. In this case, you already know the main forces driving the stock market, and all you have to do is learn the nuances of the futures market itself. Likewise, if you worked for Exxon for thirty years, you might want to initially focus on energy, since you probably understand what drives the direction of the oil market.

Once you have chosen your futures market category, the next step is to determine which instruments you will trade. Let's assume that you decide to trade instruments in the energy category. Now you must decide which contracts to focus your attention on. Does your interest lie in crude oil, natural gas or coal? If you decide to focus on crude oil, you can choose from West Texas Intermediate, Brent Sea, or a variety of other options. Each of these markets will have its own nuances: different levels of liquidity, volatility, different contract sizes and margin requirements. It is imperative that you decide on these points before starting a career in the futures market.

Types of transactions in the futures market

At the simplest level, you can buy or sell a futures contract with the expectation that its price will rise or fall. These types of trades are familiar to most stock market investors and are easy to understand. Thus, direct buying and selling is probably a good idea to get started with futures trading. Once you have made some progress in futures trading, you will probably want to use some of the more advanced futures trading techniques. Since this is a beginner's guide, we will not consider these methods in detail, limiting ourselves to only a brief description of them. You can get acquainted with them in more detail in the relevant sections of this site. Types of trades that professional futures traders typically use:

• A trader opens a long (short) position in the futures market and at the same time a short (long) position in the money market. This is a bet that the difference between the futures price of a commodity and the commodity itself will fluctuate. For example, a trader can buy 10-year US Treasury bond futures and at the same time sell the 10-year US Treasury bond itself. Thus, he will have two open positions, one to buy (long), the other to sell (short). Prices for both positions, for obvious reasons, will move almost synchronously, but fluctuations between them are also inevitable. With these fluctuations, the total profit “on paper” will be either positive or negative. The trader, of course, is interested in those fluctuations in which the total profit is positive, and he closes both positions on them, taking the jackpot;
• A trader opens long and short positions on two different futures contracts. This is a bet that the price difference between them will change. For example, a trader might buy an S&P 500 contract for March delivery and sell an S&P 500 contract for June delivery. Or buy a contract for West Texas Intermediate (WTI) oil and sell a contract for Brent Sea oil. The logic of making a profit here is the same as in the previous paragraph;
• Futures are often used for hedging. For example, if you have a large holding of stocks that you don't want to sell for tax reasons, but you're afraid of a sharp market decline, then you could sell S&P 500 futures as a hedge against a decline in the stock market.

Case Study

Now that you are familiar with the concepts and tools of futures trading, let's look at a hypothetical step-by-step example.

Step 1: Select a brokerage firm and open an account. For this example, we will use brokerage firm “XYZ” and open an account there.

Step 2: Decide which category of futures you will trade. For this example, let's decide to trade metal futures.

Step 3: Decide which instrument from the selected category to trade - let's choose gold.

Step 4: Conducting research on the selected market. This research can be fundamental or technical in nature depending on your preference. Either way, the more work you put in, the more likely you are to succeed in trading.

Step 5: Form an opinion about the market. Let's say that after conducting our research, we decide that gold is likely to rise from its current level of approximately $1675/oz to $2000/oz over the next six to twelve months.

Step 6: Determine how best to express our opinion. In this case, since we believe the price will rise, we want to buy a gold futures contract - but which one?

Step 7a: Check out the available contracts - there are two gold contracts. The standard contract is for 100 ounces, and the electronic micro contract (E-micro) is for 10 ounces. To manage our risk in our initial foray into the futures market, we will select the E-micro 10oz contract.

Step 7b: Evaluate available contracts. We then select the month in which the contract expires. Remember, with futures it's not enough to understand market direction, you also have to understand timing. A longer contract gives us more time to “get it right” but is also more expensive. Since, according to our opinion formed in paragraph 5, the price will increase in the period from six to twelve months, we can choose a contract expiring in eight or ten months. Let's choose ten months.

Step 8: Execute the trade. Let's buy a 10 month E-micro gold contract. Let's say the contract is worth $1,680.

Step 9: Let's take into account the initial margin. In this case, the margin will be $911 (this is the amount of money that ensures that we own one E-micro gold contract thanks to leverage).

Step 10: Set a stop loss. Let's say we don't want to lose more than 30% of our bet, so if the price of our contract falls below $625, we will sell.

Step 11: Monitor the market and adjust your position if necessary.

Note: This example is purely hypothetical and does not constitute a recommendation for action. These are the basic steps to perform futures trading. As you gain experience and knowledge, you will probably develop your own system that suits you completely.

Futures (from English - futures)- is a financial instrument, as well as a purchase and sale contract on the stock exchange, during which the seller and buyer negotiate only on the price and delivery time. Other information about the product (labeling, packaging, quantity, quality, etc.) are stipulated in the specification of this exchange contract, respectively, obligations to the parties are complete until the execution of the futures.

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Futures are financial instruments actively used in various sectors of the economy. Futures first appeared in Japan, when the future rice harvest was traded on the local exchange. However, modern futures originated in Chicago, which was geographically a profitable center of the Western economy.

The infrastructure here was well developed. There was a trade in rice, but there were no precise parameters for assessing the quality of the crop and no system for measuring weight. Farmers who come here often find that there are many sellers like them. For this reason, supply was higher than demand, and this affected the price of the product. It was difficult for buyers to resolve the issue of grain transportation, especially in winter. Because of such problems, buyers and sellers began to enter into contracts for deferred delivery of goods when conditions for transportation were most favorable. The scheme was often like this: supply contracts were concluded in the fall or winter, and the delivery itself was carried out closer to spring or summer. At the same time, the risk remained that the price would change up or down.

Therefore, traders entered into supply contracts in advance, fixing the price in advance. In 1848, a trading exchange was created in the same Chicago, and three years later the first futures contract was concluded on this exchange. Gradually, futures contracts became widespread in America, as they had certain benefits. When purchasing a futures contract, the right was given to either wait for delivery of the goods or resell this document. If supplies of any goods were not possible, the supplier could sell its supply obligation. At the same time, it was possible to receive both profit and loss from the futures contract, depending, for example, on weather conditions. Subsequently, speculators began to show interest in futures contracts, whose main goal was how to buy a commodity cheaper and sell it at a higher price.

In the first decades, only grain crops were traded on the stock exchange; in 1960, assets began to be sold. Since 1982, an electronic system of futures contracts for the supply of gold and silver was introduced. In the modern concept, a futures is an obligation to buy or sell an asset. In this case, the price is set in advance and the date of sale is determined. Thus, if you intend to sell shares, the total number of shares for sale, the date of execution of the contract and the price are determined in advance, with which both the seller and the buyer must agree. Thus, the sale of the underlying asset is planned in advance, and the buyer’s responsibility is to purchase the asset at a pre-agreed price. The guarantor of the transparency of the transaction is the exchange, which collects insurance deposits from each participant. The underlying assets can be stocks and futures for them, stock indices, currencies and goods that are traded on the exchange, and interest rates.

Futures contracts are traded on special trading platforms. The Moscow Exchange in Russia trades futures and options on the derivatives market. Before placing a contract on the exchange, it determines the procedure for its use. A special document is developed - a “specification”, it displays the underlying asset and the number of units in it, determines the contract execution date, and the cost of the lowest price. Futures are divided into deliverable and settlement; deliverable assets are subject to permission for the physical delivery of oil and currency. It also happens that a futures contract does not imply delivery, and it is settlement. Then, when the contract comes into force, the parties receive the difference between the early price and the price valid at the time of signing the contract. Index futures are settlement assets because they cannot be physically delivered.

Every day the price of futures contracts changes, the difference in price is debited from the account or credited to the account of the investor trading through the exchange. This is variation margin and is not an actual profit or loss because the price of the futures contract changes daily. Futures have a certain validity period; one of the main advantages of futures is risk insurance; the use of this instrument is beneficial for real suppliers and consumers. Experienced traders today still use futures trading for speculative operations. They are interested in buying futures contracts as cheaply as possible and resell them.

Futures are a liquid and unstable instrument that carries considerable risks for the investor. There can be several outcomes when the day of fulfillment of the terms of the futures contract arrives. The financial balance of the parties may remain the same, and one of the traders may receive a profit. If the price of the futures contract rises, the buyer makes a profit, otherwise the seller makes a profit. If the price of the futures contract has not changed, each party receives only a predetermined profit from the transaction.

Where to trade futures?

Futures can be traded on any market, in any region. There are many different derivatives markets by geographical location, these can be Russian, American, European, Asian derivatives markets. The American market offers the most exchanges for trading futures contracts.

How to start trading futures?

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In order to trade futures correctly, you must first familiarize yourself with and study the markets in which you plan to participate in order to sell futures. To track the trend, you first need to select three or four exchanges. To do this, you can use a simulator, which I provide on the Internet, there is a demo account and all the necessary tools. Thanks to it, you can experiment and monitor price changes throughout the entire market.

The main step on the path of a successful trader is to initially decide and choose the right futures. It is necessary to take into account volatility and liquidity, which is a very important segment of the market.
Knowing your deposit and replenishing it with a certain amount necessary to carry out operations that are important to you, take into account the size of the contract, interest in it and, most importantly, warranty service.

To carry out your first trade, you need to choose the right broker who will suit you according to all your required parameters. Brokers are divided into FCM and IB brokers.

FCM- organizations (or a specific person) accepting orders for the sale of futures, as well as the purchase of futures contracts, charging certain funds from the client for the execution of the same orders.
I.B.- differs from FCM in that it does not take money or any other assets from the client.

Both types require CFTC government registration.
No matter how things go, good or bad, you need to create a plan for yourself in advance and stick to it. Creating a good and thoughtful plan is only half the battle...

By participating in the purchase and sale of futures contracts on exchanges, even experienced traders continue to improve their skill level. You need to study regardless of your own mastery skills.

There is a lot of information on the Internet, including free sources on how to trade futures, which may be suitable for a beginner, but real professionals in their field are successful traders, use special educational materials, read a lot of new information, study video instructions, follow the markets and many other solutions improving your own qualifications.