What Is Futures Trading?

Futures trading refers to a standard trade of buying and selling of goods of a stand quality at a certain time in the future. This will mean that the market will determine the future price. 선물옵션

The trade is traded on future exchange whereby the trade is not directly secured like bonds or stocks as laid down by uniform security act, however, they are still securities although they are a type of derivative trade.

Prices will be determined with instant equilibrium between supply and demand of goods competing the buying and selling orders at the exchange during the buying or sale of the trade.

The underlying future trade assets are not traditional commodities in any way. Meaning, the financial future underlying goods or assets can be financial instruments, currencies or even securities, the intangible goods or referenced commodities such as stock index and interest rates.

Delivery date or the final statement date are the terms used to describe the future date. Settlement price of business on the exchange on a specified date is the official price of futures trading at very end of a trading session.

The trading contract offers the holder mandate to make or take deliveries under the terms and conditions of the trading, whereby the buyer is granted the right but it’s not mandatory to establish the previous position held by the seller.

This means that both entities of the futures trading are mandated to fulfill the trade in the settlement date.

The seller has to deliver the underlying goods to the purchaser or if it’s cash, the trader transfers cash from the future trader who on the other hand will sustain the loss to the person who made the profit.

The holder of the future position has to settle through buying or selling the position in order to exit the commitment before the settlement date, effectively this will close down the future position and its trade mandates.

Futures trading are trade derivatives, the clearing house will act as a counter part on all trade setting margins and crucially offers provision for mechanized settlement.

The roots of the future trade can be linked back to ancient Greece in Aristotle’s writing. He narrates the story of the poor philosopher who created the financial device.

He used his skills to foretell a prediction that the harvest of olives will be good the next season. These predictions made local olive press owners deposit money.

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