A contract or agreement to buy or sell futures is called a futures contract. The place where futures are bought and sold is called the futures market. Investors can invest or speculate in futures. Futures and spot are completely different. Spot is actually a tradable commodity. Futures are mainly not commodities, but standardized tradable contracts based on some popular products such as cotton, soybeans and oil and financial assets such as stocks and bonds. Therefore, the subject matter can be a commodity or a financial instrument.
The relationship between stock market and futures market;
Stocks are contracts for buying and selling stocks (shares) of listed companies, and commodity futures are contracts for buying and selling forward commodities.
There are also futures traded on margin. Futures can be sold short and traded on the same day.
But stocks and stock index futures are closely related. Stock index futures take the market index of stocks as a variety of futures, which is equivalent to listed companies in stocks. Futures are much riskier than stocks and can be bought and sold up and down.
1, futures are "two-way", you can buy first and then sell, or you can sell first and then buy. In the rally, you can buy futures contracts first, and then close your position after the futures price rises to earn the difference. On the contrary, in the downward trend, investors can sell futures contracts first and then make up their positions to earn the difference. However, stocks are only a one-way street, and you can only buy them first and then sell them. Therefore, you can still make a profit in the upward trend, and you can only stand by and watch the decline. If you are not careful, you will be miserable.
2. Futures adopt the margin system, and only need to pay 5%- 10% of the total contract value to trade in full, and get a profit of 100%. Therefore, the leverage ratio is high and the return on capital is high. All stocks should be invested, without the characteristics of small and wide.
3. Futures is a trading system of T+0, and stocks are T+ 1. Futures can be completed in a few minutes or even seconds, the held contract can be washed away by the opposite operation at any time on the same day, and the stock can not be closed until the next day after trading.
4. Futures can reduce investment risk through arbitrage, hedging and intertemporal trading, but stocks can't.
5. Futures should pay attention to the expiration date of the contract and close the position before this. Stocks can be held for a long time.
6. The function of futures is to avoid risks and find prices, while the function of stocks is resource allocation and risk pricing.
7. The value of futures contracts has a fixed cost and will not become zero. And stocks may become zero in value because of the bankruptcy of the company.