What is futures?

Futures are different from spot. Futures are not commodities, but contracts. Simply put, at present, both parties to the transaction agree to conduct the transaction at some time in the future. And the subject of this transaction is a standardized contract.

Give an example of futures. For example, my family has an acre of apple trees, and the vendor wants to buy my apples at the price of 3 yuan per catty after one month, when the apples are ripe. This is futures. We agreed on a specific time: one month later, we agreed on the price: 3 yuan per catty. Why is it a standardized contract for vendors to pull apples?

Give another example. For example, if you want to buy a pen, you can customize it and engrave your name. I don't want it. It's not easy to sell it if I return it or resell it to others. Then if all pens are standardized, you can sell futures to others at any time. That's the truth. All contracts are standardized, which is beneficial to the transaction.

The characteristics of the futures market:

The futures market is characterized by high risk and high return, which is more risky than the stock market, because the futures market is leveraged and margin trading. For example, the leverage is 10 times. If you have the principal of 15w, you can leverage 150w. In other words, when buying futures, you don't need to pay the full amount, you just need to pay the deposit according to a certain proportion. After paying the deposit, you have the full value of the goods in the futures contract: if the value of the goods rises, you can get all the funds for the increase in the value of the goods; However, once the loss of the value of the goods is greater than your settlement reserve, you have only two choices: liquidate part of the position or transfer the funds to the account.

Give some examples from life. Suppose the house is flat at 1.5w now, and you think the house price will definitely go up in the future, so you booked a flat at 100. You can pay a deposit of 10% in advance, that is, the temporary ownership of 15w, but you must make up the full amount when handing over the house. After half a year, when the house is 2w flat, you want to sell it. The original 150w house sold for 200w and earned 500,000 yuan. But in the same way, if the house price falls to 1w, the original house of 150w will become 100w, with a loss of 500,000. Of course, if your settlement reserve is less than 50w, the exchange will give you the above two options before you lose 500,000. This is ten times the leverage, which is equivalent to you taking 15w and someone financing you 135w. Dividend futures that don't need your profit are such high risks and high returns.