What are futures contracts?

Futures are contracts, financial instruments that are used to conclude a transaction, the settlement of which is to take place in the future. They differ from forward contracts in that transactions take place on standardized markets, i.e. exchanges, which are intermediaries. They also require collateral in the form of deposits.

 

Why does it happen that the futures contract is lost?

If the amount deposited in escrow by one of the parties is less than the current value of the contract, the trader must time, make up the shortfall, so that the value does not reach a predetermined minimum. If this minimum is exceeded, the contract can be considered lost.

When is it possible to make money on futures contracts and when to lose?

The operation of futures contracts is not speculation, so the investor can predict whether it is possible to make money on a given transaction.

In the case of a purchase, the buyer of a futures contract earns money when the current price of the underlying is higher than the price contained in the contract. The earnings will be the difference between the values.

The situation is reversed and the trader loses when the price of the underlying is lower than the price included in the contract, but then the other party, i.e. the seller, makes money instead.

Why are futures transactions made?

These transactions are made in various markets, that is, currency, interest rate, index, commodity and so on. When operating on the underlying instrument, the investor wants to make sure that the future transaction for which he has entered into a contract will not bring him a loss, and so, anticipating the situation that may be in the market, he enters into such a transaction and is then able to hedge against differences.

Are there commissions for futures transactions?

Since transactions are made on the stock exchange, which is an intermediary and at the same time secures the instruments so that speculation does not occur, the entities to which transactions are outsourced charge a commission for their work, so it should be borne in mind if one calculates a profit.