Futures trading functions

1. Price discovery

Since futures trading is a publicly traded contract transaction for forward delivery commodities, in this market A large amount of market supply and demand information is concentrated. Different people, from different locations, have different understandings of various information, and produce different views on forward prices through public bidding.

The futures trading process actually comprehensively reflects the expectations of both supply and demand parties on the changes in supply and demand relations and price trends at a certain time in the future. This kind of price information is characterized by continuity, openness and predictability, which is conducive to increasing market transparency and improving resource allocation efficiency.

2. Risk avoidance

The emergence of futures trading provides the spot market with a place and means to avoid price risks. The main principle is to use the futures and spot markets for hedging. Hedging transactions. In the actual production and operation process, in order to avoid rising costs or declining profits caused by ever-changing commodity prices, futures trading can be used for hedging, that is, buying or selling in the futures market and the spot market Futures contracts with equal quantities but opposite trading directions make the profits and losses of futures spot market transactions offset each other. Lock in the company's production costs or product sales prices to maintain established profits and avoid price risks.

3. Hedging

Buying or selling a certain quantity of spot commodities in the spot market and simultaneously selling or buying the same type and quantity as the spot commodities in the futures market , but in the opposite direction, futures commodities (futures contracts) use the profits of one market to make up for the losses of another market to achieve the purpose of avoiding price risks.

Extended information

Futures trading risks

1. Risks of using leverage

The fund amplification function not only amplifies returns but also faces risks. Therefore, how to use leverage of about 10 times and how much to use should also vary from person to person. Those with a higher level can use more than 5 times or even full leverage. If those with a low level also use high leverage, it will undoubtedly make the risk out of control.

2. Forced liquidation and liquidation

Exchanges and futures brokerage companies must conduct settlement on each trading day. When investors’ margin is insufficient and lower than the prescribed ratio, the futures company The position will be forcibly closed. Sometimes, if the market situation is extreme, the position may be liquidated and all funds in the account may be lost, and the futures company may even be required to advance the loss in excess of the account margin.

3. Delivery risk

Ordinary investors do not go long soybeans in order to buy soybeans a few months later, nor do they go short copper in order to sell copper a few months later. If the contract To hold a position until the delivery day, investors need to gather enough funds or physical goods for delivery (the payment is about 10 times the margin).

Baidu Encyclopedia-Futures