Futures trading is a new trading method developed by trading in the futures exchange on the basis of spot trading and standardized futures contracts.
Futures trading follows the principle of "openness, fairness and justice".
Buying futures is called "short selling" or "long trading", that is, long trading.
Selling futures is called "short selling" or "short selling", which means short selling.
The trading behavior of starting to buy futures contracts or selling futures contracts is called "opening positions", the behavior of traders holding contracts is called "holding positions", and the reverse trading behavior of traders knowing that they have contracts is called "closing positions" or "hedging". If the contract in the hands of the trader is not hedged according to the delivery month, the short contract holder should prepare for physical delivery, and the long contract holder should prepare funds to accept physical delivery. Under normal circumstances, most contracts are settled by hedging before expiration, and only a few need physical delivery.
Futures trading and spot trading have something in common: they are both a trading method, both real transactions, and both involve the transfer of commodity ownership.
The difference between futures trading and spot trading;
1. The direct target of buying and selling is different.
The direct object of spot trading is the commodity itself, including samples, objects and pricing.
The direct object of futures trading is futures contracts, not how many contracts to buy or sell.
2. The purpose of the transaction is different. Spot transaction is the transaction of primary currency and primary commodities, and it is a direct means to meet the needs of buyers and sellers by obtaining or transferring the ownership of commodities immediately or within a certain period of time.
Generally speaking, the purpose of futures trading is not to obtain physical objects at maturity. The purpose of hedgers is to transfer the price risk in the spot market through futures trading, and the purpose of investors is to obtain risk profits from price fluctuations in the futures market.
3. Different trading methods
Spot transactions are generally one-on-one negotiations to sign a contract, and the specific content is agreed by both parties. If the contract cannot be fulfilled after signing, it will be resorted to law.
Futures trading is conducted in an open and fair manner. One-on-one negotiation (or private hedging) is considered illegal.
4. Different trading places
Spot trading is generally not limited by trading time, place and object, flexible and convenient, and can be traded with opponents at any place.
Futures trading must be conducted in an open and centralized manner in the exchange according to law, and cannot be traded over the counter.
5. Different product ranges
The varieties of spot trading are all commodities in circulation, while the varieties of futures trading are limited. Mainly agricultural products, petroleum, metal commodities and some primary raw materials and financial products.
6. Different settlement methods
Spot trading is cash on delivery, no matter how long it takes, it is a settlement or several settlements.
Futures trading adopts a daily debt-free settlement system, and profits and losses must be settled daily. The settlement price is calculated according to the weighted average of transaction prices.
Characteristics of commodity futures trading:
1. Turn small into big: paying 2-20% performance bond can control 100% of virtual funds.
Second, the convenience of transaction: because the main factors in futures contracts, such as commodity quality and delivery place, have been standardized, the contracts have strong interchangeability and liquidity.
Third, the information is open and the transaction efficiency is high: futures trading enables traders to compete fairly under equal conditions through open bidding. At the same time, futures trading has a fixed place, procedures and rules, and it operates efficiently.
Fourth, futures trading can be operated in two directions, which is simple and flexible: futures contracts can be bought or sold after paying the deposit, and transactions can be reached within a few seconds or minutes with only a few instructions. When the market is at a favorable price, close the position or cover the position in the opposite direction.
5. The performance of the contract is guaranteed: after the futures transaction is completed, it must be confirmed by the settlement department, and there is no need to worry about the performance of the transaction.