The difference between futures trading and spot trading

Futures trading and spot trading have the same things. For example, they are both a trading method, a true purchase and sale, and involve commodity ownership. The transfer, etc., differ in the following points:

(1) The direct objects of the transaction are different. The direct object of spot trading is the commodity itself, with samples, physical objects, and pricing based on the goods. The direct object of futures trading is futures contracts, which is how many hands or futures contracts to buy or sell.

(2) The purpose of the transaction is different. Spot trading is a transaction involving first-hand money and goods, with physical delivery and payment settlement immediately or within a certain period of time. The purpose of futures trading is not to obtain physical goods at maturity, but to avoid price risks or make investment profits through hedging.

(3) Different transaction methods. Spot transactions are generally one-on-one negotiations to sign a contract, and the specific content is agreed upon by both parties. If the contract cannot be honored after signing, legal action will be taken. Futures trading is conducted in an open and fair competitive manner. Negotiating one-on-one deals, or private hedging, is illegal.

(4) The trading venues are different. Spot transactions are generally conducted in a decentralized manner. For example, grain, oil, daily industrial products, and production materials are traded decentrally by some trading companies, manufacturers, and consumer manufacturers. Only some fresh food and individual agricultural and sideline products are centralized in the form of wholesale markets. trade. However, futures trading must be conducted openly and centrally within the exchange in accordance with regulations, and cannot be traded over-the-counter.

(5) The security systems are different. Spot transactions are protected by laws such as the Contract Law. If the contract is not honored or the contract is breached, it must be resolved through legal or arbitration methods. In addition to national laws, industry and exchange rules, futures trading is mainly protected by a margin system to ensure redemption at maturity.

(6) The product range is different. The varieties of spot trading are all commodities that enter circulation, while the varieties of futures trading are limited. Mainly agricultural products, petroleum, metal commodities and some primary raw materials and financial products.

(7) The settlement methods are different. Spot transactions are cash on delivery, no matter how long it takes, they are settled once or several times. Due to the implementation of the margin system, futures trading must settle profits and losses on a daily basis and implement a day-to-day marking system.

The settlement price is calculated based on the transaction price. The CZCE settlement price is the weighted average price of all traded futures contract prices of the same type on the day. The settlement price has the following functions:

(a) Calculate the profit and loss of closing positions and Basis for position profit and loss;

(b) Basis for deciding whether to add margin;

(c) Basis for setting the limit amount for the next trading day,