What you need to know

What do you need to know before you start trading futures so that you don’t foolishly lose money, not bring the transaction to real delivery and not ruin your relationship with the broker? Where to start if you want to work in the international derivatives market? Where can I find the information I need?

Let's look at the entire process that begins with an uncontrollable desire to invest in a specific commodity asset and ends with a transaction, using the example of one of the actively traded futures contracts. For the sake of example, we will assume that a beginner has decided to invest in gold, but all the reasoning and algorithms given below will be relevant for other derivatives market instruments, be it oil, platinum, beef, wheat, timber, coffee, and so on.

So, first of all, we find out the ticker of the instrument. To do this, we go to the exchange website - with 99% probability, the required instrument will be found either on CME (www.cmegroup.com) or on ICE (www.theice.com), these are the two largest exchange holdings. Look at the “Products” section or menu item. On the CME website in the menu we find the desired subsection “Metals”, where in the “Precious” column we see the gold futures “GC Gold”. On the page dedicated to gold futures that opens, we find a link to the contract specification - “Contract Specifications”, which we will need more than once. This table summarizes all the basic universal data on the futures, including the ticker, it is in the “Product Symbol” line - GC.

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Next, we need to find out which futures with delivery in what month is now the most liquid - after all, as you can see in the “Listed Contracts” specification line, more than 20 gold contracts with different delivery dates are traded in parallel. In order to find the most actively traded one, let's go to the "futures" section on the BarChart website. This site is good because, in addition to the months, it immediately shows their stock symbol. On the left we find the “Metals” section we need, select the first line “Gold” in the table that opens.

After this, we will see all 20 “gold” contracts quoted for 5 years in advance. We need the “Volume” column, where we find the largest volume. If the volumes of two neighboring months are almost equal, then we choose the distant one, since this means that there is a process of transition from the nearby month to the next. Typically, the most liquid futures are traded for delivery 1-2 months from the current date. In our case, the most active is June 2012. Its full ticker, as can be seen in the first column, is GCM12. That is, M12 is added to the GC stock ticker found in the previous paragraph - the month and year code. The month is always indicated by one letter (full list of 12 characters in calendar order: F,G,H – J,K,M – N,Q,U – V,X,Z). The year in the code is indicated by the last two digits.

Last day of trading and start day of deliveries

The next thing you need to know is the last day of trading and the day the futures deliveries begin. Especially if the delivery will not be in 2-3 months, but already in the current one. Knowing these dates is necessary in order not to be left with a contract in your hands in the last hours of its existence. With this development of events, at best, you will have to close it on an illiquid market with huge spreads, and at worst, you will run into a supply and wonder how to pay for a box of gold bars and where to sell them later.

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It is recommended to switch from one contract to another at least several business days before the start of delivery if futures are traded monthly, and one and a half to two weeks in advance if they are traded quarterly. In order to see the dates for the end of trading and the start of delivery requirements (LTD, Last Trading Day and FND, First Notice day), we return to the exchange website, to the specifications page. We find there the “Product Calendar” link, which gives us another table. In it we look at the line corresponding to our financial instrument - JUN 2012 GCM12 - and see that the last day of trading for it is 06/27/11, and the start of requests for delivery is already 05/31/11. Thus, it is necessary to close this contract and open the next one a couple of days before the end of May.

Financial questions

Let's move on to financial issues. We need to determine how many contracts we can purchase based on the amount of funds in our trading account, and whether there will be enough money left there in case the market suddenly goes against us after the transaction. Such settlements in the derivatives market are carried out on the basis of margin collateral.

When opening a position on any contract, an amount is fixed in the account, the size of which is determined by the exchange and changes quite rarely. This amount will become unavailable for use for the entire time we are the owner of the fixed-term contract and will be released immediately after its closure. On the exchange website, huge tables of margins are not very pleasant to read, so we go to the R.J.O’Brien website, where a convenient summary table of margin margins for the most popular contracts is stored (in pdf format). Our GC gold futures are listed in the CMX - COMEX section (this is the part of the CME that historically deals with precious metals). We look at the “Spec Init” column, this is Initial Margin - the initial margin. In gold it is now $10.125. This means that with an account of $15,000 we can operate with only one contract, with an account of $35,000 - no more than three. The next column “Spec Mnt” is the Maintenance Margin, in our case $7,500. If the account falls below this amount (multiplied by the number of available contracts), an angry broker will call (“Hello, Margin Call!”), and you will have to either close the position (i.e., record losses) or promptly deposit additional money into the account ( to a level not lower than the initial margin).

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A break during work

Despite the fact that electronic trading in futures takes place almost around the clock, they have a break in their work. In addition, they are not active at any time of the day. In the specifications on the exchange website, you need to look at the trading hours (line “Hours”), not forgetting to convert them to local time. The GC gold contract is traded with a 45-minute break (16:15 - 17:00 in Chicago; for Moscow the difference is -9 hours).

The most active electronic trading practically coincides in time with classic trading on the exchange floor, which is conducted in the form of an open auction. For gold, trading “on the floor” of the Chicago Exchange takes place on weekdays from 7:20 to 12:30, or from 16:20 to 21:30 Moscow time.

What else might you need?

From the data published in the specification, you can calculate the cost of the minimum price step, the full value of the contract and trading leverage. To do this, we will use the lines “Contract Size” and “Minimum Fluctuation”. The volume of 1 contract for GC gold is 100 troy ounces (approximately 3.1 kg). The minimum price movement is $0.10 per ounce. This means that with a minimal movement in the price of gold in any direction, our account will “quantum” change by $10 (100 ounces * 10 cents). From personal experience, most financial instruments on the derivatives market trade at $5 - $15 per tick. Next, let's look at the dimension of the quote - in the line “Price Quotation” we see that the quote published on the exchange is the price of one ounce of gold in dollars and cents. Currently, one ounce, based on the last exchange transaction on GCM12, is valued at $1672.9 - we can see this and other quotes on the “Quotes” page. The total value of the contract is equal to its volume multiplied by the quotation. This means that the total value of one “gold” futures in your account is $167,290 - more than 167 thousand dollars! By comparing the margin required to trade this contract and its full value, we calculate the leverage - $10,125 to $167,290 - it is approximately 1: 17. For comparison, in the US stock market, leverage is at best 1: 4.

So, now we know how futures are designated, for which delivery month the most active trading is conducted and when it ends, what time of day is best to participate in exchange trading and how much money you need to keep in your account for this. Using the example of a transaction with gold futures, we analyzed almost the entire algorithm for starting trading. In principle, this knowledge is enough to buy and sell any futures contracts in electronic trading in the United States.

To the questions “So, after all, should I buy or sell? and when exactly?” answer fundamental and technical analysis, which is the main topic of hundreds of books on trading. And the last piece of advice for beginners - don’t forget to get an “emergency” telephone number from your broker for the Trading Desk department, which you can use to urgently place an order or close a deal if Internet access suddenly disappears or the computer with the trading platform fails.
Happy trading!

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My comment

Everything in the article is written in sufficient detail and clearly, but I would like to focus on some issues.

Futures trading is very similar to Forex trading with some differences. There are 4 main features:

1) Futures have an expiration date (delivery date of the commodity). If a transaction on Forex can be held indefinitely, then on the futures market, in a month (or quarter) the trading position will be automatically closed.

2) Swaps are not charged on futures. They are already included in the price of the futures contract itself.

3) Instead of leverage, “collateral margin” is used (this is an analogue of leverage). The collateral may be different for different contracts! Keep this in mind.

4) The cost of a point (tick) in futures can also vary greatly between different contracts.

In all other respects, futures are similar to Forex. Profitable strategies, training, videos - all this is equally applicable in both places.

One of the most common trading platforms for futures trading is quik. Simple - no frills, but suitable for dummies.

By the way, be prepared to pay for the trading platform! Yes Yes! This Forex trading terminal is provided for free...

One of the most popular trading instruments among Russian traders is RTS index futures. There are also currency futures (analogous to FOREX currency pairs).

I also recommend that you familiarize yourself with the specifications (codes) of futures!
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Video on this issue:

A futures is a contract to buy or sell an asset in the future, but at its current price.

For a simpler understanding, I suggest you consider an example: a farmer sowed his fields with wheat, at the moment the cost of wheat is 200 rubles per ton. According to forecasts, the year is expected to be fruitful, without droughts or other natural disasters. Knowing this, the farmer assumes that in the fall there will be more wheat than there is demand for it, which, in turn, will lead to a decrease in its price. Having made such conclusions, the farmer decides to sell his future harvest today at the current price, so as not to make a mistake in the future. He enters into an agreement with the buyer that in the fall he will sell him 100 tons of wheat at the current price. In this case, the farmer is the seller of the futures contract.

The main point of a futures contract is to receive a product in the future at the current price.

The very first financial instruments arose along with trade. Initially, it was a completely unorganized market, which was based on oral agreements between merchants. After the letter appeared, contracts for the supply of certain goods began to appear. By the 18th century, Europe already had the main types of financial instruments, which over time acquired the features of modern ones.

Strategies for using futures

Today, there are a huge number of simple strategies for using futures.

The first strategy is to use futures to hedge risk. It is best to consider how this is done using a specific example. Let’s say in a month you should receive revenue in dollars, but you are afraid that by this time the exchange rate will change. In such a situation, the optimal solution would be to purchase futures for the dollar/ruble currency pair, which will allow you to exchange dollars for rubles in a month at the rate at the time of purchasing the futures.

The second strategy for using futures is speculative operations. In this case, the main task of speculators is to make a profit from the difference in the cost of buying and selling futures. Also, a small commission size has a positive impact on the profitability of buying/selling futures.

The third strategy for using futures is arbitrage operations. In this case, profit is made due to the difference in intermarket spreads. When performing arbitrage operations, a trader purchases futures on one exchange and sells them on another, where the value of this asset is higher.

Futures trading for beginners

Futures trading for beginners begins with choosing the necessary instrument. Let's take gold as an example, but you can use any other product, including silver, oil, and so on. I suggest you use the largest exchange holdings for these purposes: CME and ICE. So, select the “Products” sub-item, then “metals” and in the window that appears, select “GC Gold” - this is a gold futures contract. By clicking on this, a window will open in front of you with a link to the contract specification. In the sign that appears you can find a lot of useful information. Futures trading may seem quite complicated for beginners, but you should not be intimidated, as over time you will gain certain skills and will be able to handle it with ease.

Futures Trading Basics

To master the basics of futures trading, you need to learn how to analyze futures liquidity. To do this, you need to view all contracts, determine their volumes and find out the current exchange value. Another important point that you should pay attention to is the start and end time of trading in the futures you are interested in. This point is especially important if the product is shipping very soon. When trading futures, you should definitely take this into account so as not to be left with a box of gold on an illiquid market and then think about where to get the money to pay for it.

Another important point is that you must learn to correctly calculate the number of contracts to be purchased. When entering into contracts, you should always have spare funds in your account in case the market does not meet your expectations. In the derivatives market, this amount is called margin. As soon as you create a trade, a certain amount of money is frozen in your account, the size of which is determined by the exchange. You will not be able to use the frozen amount as long as your contract is in force. Once the contract is closed, the amount of money can be withdrawn.

Speculators in the futures market

A futures market without speculators is the same as an auction without buyers. In almost all markets there are more speculators than real buyers. It is thanks to them that goods become liquid.

When speculators enter into contracts in the futures market, they knowingly expose themselves to risk. They take risks in order to profit from price fluctuations.

I bring to your attention an example of successful trading: on May 1, a speculator bought a contract for copper at 105.25 (the margin was $1,500), 5 days later the contract was sold at a price of 111.70, resulting in a net profit of $1,612.5.

If the market did not meet the speculator's expectations and he were forced to sell the copper at 99.25, then he would have suffered a loss of $1,500, that is, he would have lost all of his initial money. Speculators can be both ordinary people and corporate members of the exchange. Both have the same goal: to make money on contracts by buying when the price goes up and selling when the price moves down.

For a more in-depth look at futures trading, I suggest you read the book Todd Lofton wrote, Futures Trading Basics. You can download it by following the link below.

The modern futures and options market is the largest trading platform, combining stability, modern infrastructure, guarantees, and modern technical solutions proven over decades. How to trade futures in order to receive a stable and rapidly growing income - this is a question asked by many newcomers to this market.

A futures contract is an agreement between two market participants to deliver an asset on a timely basis and at a pre-agreed price. The intermediary in concluding a transaction is the exchange, which acts as a regulator. Futures contracts are standardized in a number of aspects (form of payment, amount of penalties for failure to fulfill agreements, type of goods, delivery conditions) with the exception of the price of goods put up for trading on the exchange. The main property that futures have is the ability to transfer obligations under the contract to third parties, which allows participants in the transaction to minimize the level of risk. Each futures has its own specification and trades on the market for a certain time. For example, many futures trade on the market for six months, of which the last 3 months are usually the most active for transactions. These financial instruments are traded on stock exchanges in many countries, including the derivatives market of the Moscow Exchange.

Features of futures

To understand how to trade futures, you need to know the features of this instrument. Futures contracts are distinguished by the following principles:

1. Transactions are concluded within the framework of the exchange.
2. Futures are a unified contract, the terms of which are established at the conclusion of the transaction.
3. The execution of futures is regulated by the exchange through a margin system.
4. Receipt of dividends on transactions is guaranteed due to the possibility of early fulfillment of obligations.

Futures contracts have the following advantages for traders:

• simplified payment system;
• instant transaction conclusion;
• the possibility of participation in trading by persons who do not have assets on the exchange;
• small commission (compared to stock trading);
• leverage;
• high liquidity (at any time you can easily get rid of them by selling);
• the opportunity to enter the market with minimal capital (for example, the derivatives market of the Moscow Exchange - from 10 thousand rubles).

Guarantees for the performance of futures contracts are provided through the formation of an insurance fund. All futures have a certain agreement period, after which an asset must be delivered at a fixed price and a certain financial result must be obtained. The purpose of a futures contract is to make a profit through a discount when concluding a transaction. There are futures for various types of assets that meet market conditions:

• indexes;
• goods;
• interest rate;
• exchange rates, etc.

How to trade futures and conditions for entering into transactions

To have a complete understanding of how to trade futures, let's look at how markets for these assets are organized. Futures trading takes place on futures exchanges. The entities involved in concluding a transaction are the futures exchange, the settlement firm and the client. The exchange maintains accounts of professional market participants - brokers who have contractual relationships with individuals and legal entities. All actions and calculations for the implementation of the transaction are performed by the exchange and the settlement company. The task of traders is to predict price movements. To start trading, it is important to know all the parameters of the futures contract - terms of conclusion, warranty service, time of fulfillment of obligations under the contract, cost of the contract. The number of futures for purchase is limited by the amount of funds in the client's account.

Using this financial instrument, a trader has the opportunity to conduct margin trading with large trading leverage (from 1 to 2 to 1 to 10), which determines the size of the risks and liquidity of the futures. Today, learning the technical intricacies of trading futures contracts has become much easier thanks to the introduction of modern trading platforms. The most important task of a trader is to correctly forecast and select the most highly liquid assets that can bring large profits.

It is enough to figure out how to trade futures once to appreciate the advantages of this financial instrument. Some tips that may be useful for traders new to futures trading.

• Futures for the currency pairs euro/dollar, ruble/dollar, the RTS index, Sberbank, Gazprom are considered the most highly liquid and promising from the point of view of obtaining a stable profit on the derivatives market of the Moscow Exchange.
• To build a trading strategy and competent forecasting, it is important to replenish your knowledge and practical skills by completing training. You can take advantage of high-quality courses from the section.
• The smartest way to hone your acquired knowledge is on a demo account.
• Select 2-3 markets to experiment with your trading strategies.
• In order to make your first real trade, you need to open an account with a futures broker. Choosing a reliable brokerage company can be an integral part of success in futures trading. We recommend paying attention to a company that allows you to enter into futures transactions from one account both on the Moscow Exchange and on other global futures platforms (including the Chicago CME Exchange).
• Setting a risk limit will allow you to control the size of your account and prevent uncontrollable losses.

As a rule, when people talk about securities, the main association is shares. However, those who have experience working on stock exchanges know very well that the volume of trading in derivative securities (futures also includes them) is orders of magnitude greater than the volume of trading in shares. Of course, the latter have their own attractive qualities, but we will talk about futures trading specifically.

Futures contract and its characteristics

This is a security that obliges the parties to purchase and sell goods in the future at an agreed price. This contract is concluded for:

• insurance against random price fluctuations at the moment when the actual purchase/sale of the goods specified in it (hereinafter referred to as the underlying asset) will take place;
• carrying out speculative operations.

In the first case, the futures contract is brought to delivery; in the second, it can be terminated at any time.

The underlying assets can be: agricultural products, gold, oil, etc., as well as various financial instruments (stocks, Forex currency, etc.). Note that settlement futures trading is currently developed. Here the underlying asset is a certain value, for example, the MICEX index. In this case, the difference between the quote of the concluded transaction and the quote formed at the time of execution is paid.

Futures are standardized for trading on the exchange. When concluding a transaction, only the price of the underlying asset and the number of futures contracts are set. All other characteristics are specified in the specifications on the trading exchange:

• type of underlying asset (gold, currency, etc.) and the number of its units;
• execution date and delivery condition date;
• minimum price step and its cost;
• the amount of the guarantee (this value may change).

Carrying out trading operations

For beginners, it is very important to understand all the procedural aspects of futures trading.

It all starts with the trading participant entering money into the trading system on the exchange, after which orders can be submitted.

Let us note an important point. When futures are traded, positions are opened and closed. The contract is not being purchased. No money is paid for it. Opening a futures position (for stocks, gold, currencies, etc.) results in money being blocked on the participant’s trading account opened on the exchange. The amount is determined as the product of the number of open positions by the amount of the guarantee specified in the contract specification. This is done to cover possible losses. Blocked money cannot be withdrawn or used for other transactions.

Positions are opened either in the direction of growth in the price of the underlying asset
(long position, long), or in the direction of its fall (short position, short).

Having decided to complete the operation, the participant closes the position. At the time of the transaction, the funds reserved by the trading system are unlocked.

The result of the operation (variation margin) is determined as the product of the minimum price step by the difference between the opening and closing quotes of the position and by the number of contracts participating in the operation. It will be positive if the price movement of the underlying asset was in the direction of opening the position.

For beginners, it is useful to know that the calculation of variation margin is carried out by the trading system on the exchange at current prices. This data is updated with high frequency and each participant receives it in near real time. At the end of the trading day, at the time of clearing, the received variation margin is credited to the participant’s trading account or debited from it. And he starts the new day with a renewed supply of funds.

This is where one of the main differences between the derivatives market and the stock market becomes clear - in the latter, changes in the trading account occur only as a result of transactions. When trading futures, even if not a single transaction was carried out during the trading day, the variation margin will be calculated due to changes in quotes. Which will lead to an increase or decrease in the trading account.

Note. In Forex, the situation with clearing is different, but the described scheme is fundamentally the same.

Where to work with futures

In our Russian reality there are the following possibilities. Futures trading takes place on the MICEX derivatives market, which was previously called FORTS (since it worked within the framework of the Russian trading system). The Internet also allows you to work on the international Forex market.

The MICEX (FORTS) has a large range of instruments. Their underlying assets:

• indices of RTS, MICEX and other exchanges;
• industry indices;
• securities;
• exchange rates, interest rates;
• commodities (oil, agricultural products, electricity), precious metals (gold, silver, platinum);
• weather.

In Forex, the main underlying assets are based on exchange rates. But the instruments there are also gold, oil, etc.

For beginners, you need to decide on which platform: MICEX (FORTS) or Forex it will work and futures on which underlying asset (commodities, currencies, indices, gold, etc.) to trade. After this, choose an intermediary through whom he will gain access to the auction and enter into an agreement with him.

Where to begin

Before you start trading directly, you need to prepare for it:

• think over the technical side;
• develop a scheme for working on the stock exchange and follow it in a disciplined manner;
• develop a sequence for practical mastery of working with futures.

The first is hardware and software and communications. Working with futures involves high risks. Therefore, it is necessary to have a main computer and a backup (mobile or at least tablet) with a trading program installed and connected on them, allowing you to carry out operations in the event of technical problems or when traveling. When planning the latter, you must remember that work on the MICEX runs from 10.00 to 23.50, but Forex, where currencies and gold are traded, operates around the clock.

Since the connection with the trading system is via the Internet, reservation is also necessary through this channel. Moreover, one of the backup channels must be using mobile Internet. But there is no particular hope for telephone communication. In acute situations, it is “clogged.”

There are quite a lot of trading programs. But the most common one is QUIK.
It is convenient and can be easily adjusted to suit specific interests. QUIK works with major technical analysis programs. The mobile version of QUIK saves you when you only have a smartphone at your disposal.

Secondly, the risks require careful consideration of your own scheme explaining how to trade futures. The main thing in it is what to do if the direction of price movement does not coincide with expectations. There are many recommendations, but you will have to “customize” them to suit yourself by trying them in practice. And in order for the lessons of these trials to “crystallize” into experience and be embodied in effective operations, one should be extremely disciplined when implementing the adopted scheme. Discipline does not mean “stupid” adherence. All deviations must be thoughtful.

Third, you should not immediately start trading those futures that are “heard of.” On the MICEX, these are futures on the RTS or MICEX index, exchange rates, on Forex, these are futures on major currencies, gold. Having created the main trading table in QUIK, you need to find a security with a small guarantee, high liquidity and low volatility (for example, futures on VTB shares). And use it to work out a scheme of actions and customize QUIK for it, gain experience and temper your nerves, gaining the necessary professionalism. The latter is especially necessary for working on Forex, where the main underlying assets are currencies and gold.

What are the risks?

To clarify this aspect, which is extremely important for beginners who want to understand how to trade futures, let me remind you that in this market, unlike the stock market, the recalculation of the trading account size does not depend on the execution of transactions. The presence of an asset already leads to periodic revaluation, as described above. It is expressed in two points:

changing the amount of guarantee collateral and accruing/writing off variation margin. All this is reflected in the amount of available funds in the trading account. All this data can be seen in QUIK.

If the balance of available funds is negative, then you need to:

• or replenish it by introducing money from outside;
• or reduce the size of the active position.

Through QUIK the participant will receive the corresponding requirement. If it is not fulfilled, the position will be reduced forcibly.

The change in the amount of the guarantee occurs for two reasons:

• due to changes in quotes (in accordance with their rise or fall) - but these are small fluctuations;
• by decision of the exchange, when volatility “goes off scale” (in Forex this is carried out according to an algorithm).

So on March 3, 2014, during the trading day on FORTS, the size of the guarantee was increased 4 times.

Now the main danger is clear. Due to an increase in the size of the guarantee, some positions may be lost even if a positive variation margin is obtained. But this is a case when lost profit is not a loss. The situation is much worse if the variation margin is negative. Losses of an asset (futures for currency, gold, shares) can be catastrophic. And the reverse movement of quotes even the next day will be little consolation. This danger is very real for both FORTS and Forex.

And the current reality of trading these instruments.

What is a futures in simple words

is a contract to purchase or sell an underlying asset within a predetermined time frame and at an agreed price, which is fixed in the contract. Futures are approved on the basis of standard conditions that are formed by the exchange itself where they are traded.

For each underlying asset, all conditions (delivery time, place, method, etc.) are set separately, which helps to quickly sell the assets at a price close to the market.

Thus, secondary market participants have no problem finding a buyer or seller.

To avoid the refusal of the buyer or seller to fulfill obligations under the contract, a condition is established for the provision of collateral by both parties.

Nowadays, it is not the economic situation that dictates the price of futures contracts, but they, by forming the future price of supply and demand, set the pace of the economy.

What is a Futures or Futures Contract?

(from the English word future - future), is a contract between a seller and a buyer providing for the delivery of a specific good, stock or service in the future at a price fixed at the time the futures is concluded. The main goal of such instruments is to reduce risks, secure profits and guarantee delivery “here and now.”

Today, almost all futures contracts are settled, i.e. without obligation to supply actual goods. More on this below.

First appeared on the commodity market. Their essence lies in the fact that the parties agree on a deferred payment for the goods. At the same time, when concluding such an agreement, the price is agreed upon in advance. This type of contract is very convenient for both parties, as it allows you to avoid situations where sharp fluctuations in quotes in the future will provoke additional problems in setting prices.

• , as financial instruments, are popular not only among those who trade various assets, but also among speculators. The thing is that one of the varieties of this contract does not imply actual delivery. That is, a contract is concluded for a product, but at the time of its execution, this product is not delivered to the buyer. In this respect, futures are similar to other financial market instruments that can be used for speculative purposes.

What is a futures contract and for what purposes is it used? Now we will reveal this aspect in more detail.

“For example, I want futures for some shares that are not on the broker’s list” is the classic understanding from the Forex market.

Everything is a little different. It is not the broker who decides which futures to trade and which not. This is decided by the trading platform on which trading is conducted. That is, the stock exchange. Sberbank shares are traded on the MB - a very liquid chip, so the exchange provides the opportunity to buy and sell futures on Sberbank. Again, let's start with the fact that all futures are actually are divided into two types:

• Calculated.
• Delivery.

A settled future is a future that does not have delivery. For example Si(dollar-ruble futures) and RTS(futures on our market index) are settlement futures, there is no delivery for them, only settlement in cash equivalent. Wherein SBRF(futures on Sberbank shares) - delivery futures. It will supply shares. The Chicago Exchange (CME), for example, has deliverable futures for grain, oil and rice.

That is, if you buy oil futures there, they can actually bring you barrels of oil.

We just don’t have such needs in the Russian Federation. To be honest, we have a whole sea of ​​“dead” futures, for which there is no turnover at all.

As soon as there is a demand for delivery of oil futures on the MB - and people are ready to transport barrels with Kamaz trucks - they will appear.

Their fundamental difference is that when the expiration date arrives (the last day the futures are traded), no delivery occurs under settlement contracts, and the futures holder simply remains “in the money.” In the second case, the actual delivery of the basic tool occurs. There are only a few delivery contracts in the FORTS market, all of which provide delivery of shares. As a rule, these are the most liquid shares of the domestic stock market, such as: , and others. Their number does not exceed 10 items. Deliveries under oil, gold and other commodity contracts do not occur, that is, they are calculated.

There are minor exceptions

but they relate to purely professional instruments, such as options and low-liquid currency pairs (currencies of the CIS countries, except for the hryvnia and tenge). As mentioned above, the availability of deliverable futures depends on the demand for their delivery. Sberbank shares are traded on the Moscow Exchange, and this is a liquid chip, so the exchange provides the opportunity to buy and sell futures for this share with delivery. It’s just that we, in Russia, do not have the needs for such a prompt supply of gold, oil and other raw materials. Moreover, on our exchange there is a huge number of “dead” futures, for which there is no turnover at all (futures for copper, grain and energy). This is due to banal demand. Traders do not see any interest in trading such instruments and, in turn, choose assets that are more familiar to them (dollar and shares).

Who issues futures

The next question that a trader may have is: who is the issuer, that is, puts futures into circulation.

With shares, everything is extremely simple, because they are issued by the company itself, which originally owned them. At the initial offering, they are bought by investors, and then they begin circulation on the secondary market we are familiar with, that is, on the stock exchange.

In the derivatives market everything is even simpler, but it is not entirely obvious.

A futures is essentially a contract that is entered into by two parties to a transaction: buyer and seller. After a certain period of time, the first undertakes to buy from the second a certain amount of the underlying product, be it shares or raw materials.

Thus, traders themselves are the issuers of futures; the exchange simply standardizes the contract they enter into and strictly monitors the fulfillment of duties - this is called.

• This begs the next question.

If everything is clear with shares: one delivers shares, and the other acquires them, then how should things stand with indices in theory? After all, a trader cannot transfer the index to another trader, since it is not material.

This reveals another subtlety of futures. Currently, for all futures, , which represents the trader’s income or loss, is calculated relative to the price at which the transaction was concluded. That is, if after the sale transaction the price began to rise, then the trader who opened this short position will begin to suffer losses, and his counterparty, who bought this futures from him, on the contrary, will receive a profitable difference.

A fixed-term contract is actually a dispute, the subject of which can be anything. For indexes, hypothetically, the seller should simply provide an index quote. Thus, you can create a future for any amount.

In the USA, for example, weather futures are traded.

The subject of the dispute is limited only by the common sense of the exchange organizers.

Do such contracts make any financial sense?

Of course they do. The same American weather futures depends on the number of days in the heating season, which directly affects other sectors of the economy. One way or another, the market continues to perform one of its main tasks: the accumulation and redistribution of funds. This factor plays a huge role in the fight against inflation.

The history of futures

The futures contract market has two legends or two sources.

• Some believe that futures originated in the former capital Japan city Osaka. Then the main traded “instrument” was rice. Naturally, sellers and buyers wanted to insure themselves against price fluctuations and this was the reason for the emergence of this type of contract.
• The second story says, like most other financial instruments, the history of futures began in the 17th century in Holland when Europe was overwhelmed " tulip mania" The onion cost so much money that the buyer simply could not buy it, although some part of the savings was present. The seller could wait for the harvest, but no one knew what it would be like, how much he would have to sell and what to do in case of a crop failure? This is how deferred contracts arose.

Let's give a simple example . Suppose the owner of a farm is growing wheat. In the process of work, he invests money in the purchase of fertilizers, seeds, and also pays employees. Naturally, in order to continue, the farmer must be confident that all his costs will be recouped. But how can you get such confidence if you cannot know in advance what the prices for the crop will be? After all, the year may be fruitful and the supply of wheat on the market will exceed demand.

You can insure your risks using futures. The farm owner can conclude in 6 or 9 months at a certain price. Thus, he will already know how much his investment will pay off.

This is the best way to insure price risks. Of course, this does not mean that the farmer unconditionally benefits from such contracts. After all, situations are possible when, due to severe drought, the year will be lean and the price of wheat will rise significantly above the price at which the contract was concluded. In this case, the farmer will not be able to raise the price, since it is already fixed under the contract. But it is still profitable, since the farmer has already included his expenses and a certain amount in the price established under the contract. profit.

This is also beneficial for the buying side. After all, if the year is bad, the buyer of the futures contract will save significantly, since the spot price for raw materials (in this case, wheat) can be significantly higher than the price under the futures contract.

A futures contract is an extremely significant financial instrument that is used by the majority of traders in the world.

Translating the situation into today's terms and taking as an example Urals or Brent , a potential buyer approaches the seller with a request to sell him a barrel with delivery in a month. He agrees, but not knowing how much he can earn in the future (quotes may fall, as in 2015-2016), he offers to pay now.

The modern history of futures dates back to 19th century Chicago. The first product for which such a contract was concluded was grain. Initially, farm owners brought grain or livestock to Chicago and sold it to dealers. At the same time, the price was determined by the latter and was not always beneficial to the seller. As for buyers, they were faced with the problem of delivery of goods. As a result, the buyer and seller began to do without dealers and enter into contracts with each other.

What is the work plan in this case? She could be next - the owner of a farm was selling grain to a merchant. The latter had to ensure its storage until its transportation became possible.

The merchant who purchased the grain wanted to insure himself against price changes (after all, storage could be quite long, up to six months or even more). Accordingly, the buyer went to Chicago and entered into contracts with a grain processor there. Thus, the merchant not only found a buyer in advance, but also ensured an acceptable price for grain.

Gradually, such contracts gained recognition and became popular. After all, they offered undeniable benefits to all parties to the transaction.

For example, a grain buyer (merchant) could refuse the purchase and resell his right to another.

As for the farm owner, if he was not satisfied with the terms of the transaction, he could always sell his supply obligations to another farmer.

Attention to the futures market was also shown by speculators who saw their benefits in such trading. Naturally, they were not interested in any raw materials. Their main goal is to buy cheaper in order to later sell at a higher price.

Initially, futures contracts only appeared on grain crops. However, already in the second half of the 20th century they began to be concluded on live cattle. In the 80s, such contracts began to be concluded on precious metals, and then to stock indices.

As futures contracts evolved, several issues arose that needed to be addressed.

• Firstly, we are talking about certain guarantees that contracts will be fulfilled. The task of guaranteeing is taken over by the exchange where futures are traded. Moreover, development here went in two directions. Special reserves of goods and funds were created at the exchanges to fulfill obligations.
• On the other hand, resale of contracts has become possible. This need arises if one of the parties to a futures contract does not want to fulfill its obligations. Instead of refusing, it resells its right under the contract to a third party.

Why has futures trading become so widespread? The fact is that goods carry certain restrictions for the development of exchange trading. Accordingly, to remove them, contracts are needed that will allow you to work not with the product itself, but only with the right to it. Under the influence of market conditions, owners of rights to goods can sell or buy them.

Today, transactions in the futures market are concluded not only for commodities, but also for currencies, stocks, and indices. In addition, there are a huge number of speculators here.

The futures market is very liquid.

How futures work

Futures, like any other exchange asset, have their own price and volatility, and the essence of how traders make money is to buy cheaper and sell more expensive.

When a futures contract expires, there may be several options. The parties keep their money or one of the parties makes a profit. If by the time of execution the price of the commodity rises, the buyer receives a profit, since he purchased the contract at a lower price.

Accordingly, if at the time of execution the price of the commodity decreases, the seller receives a profit, since he sold the contract at a higher price, and the owner receives some loss, since the exchange pays him an amount less than for which he bought the futures contract.

Futures are very similar to options. However, it is worth remembering that they do not provide the right, but rather the obligation of the seller to sell, and the buyer to buy a certain volume of goods at a certain price in the future. The exchange acts as a guarantor of the transaction.

Technical points

Each individual contract has its own specification, the main terms of the contract. Such a document is secured by the exchange. It reflects the name, ticker, type of contract, volume of the underlying asset, circulation time, delivery time, minimum price change, as well as the cost of the minimum price change.

Concerning settlement futures, they are of a purely speculative nature. Upon expiration of the contract, no delivery of goods is expected.

It is settlement futures that are available to all individuals on exchanges.

Futures price– this is the price of the contract at a given point in time. This price may change until the contract is executed. It should be noted that the price of a futures contract is not identical to the price of the underlying asset. Although it is formed based on the price of the underlying asset. The difference between the price of the futures and the underlying asset is described by terms such as contango and backwardation.

The price of the futures and the underlying asset may differ(despite the fact that by the time of expiration this difference will not exist).

• Contango— the cost of the futures contract before expiration ( expiration date of futures) will be higher than the value of the asset.
• Backwardation- the futures contract is worth less than the underlying asset
• Basis is the difference between the value of the asset and the futures.

The basis varies depending on how far away the contract expiration date is. As we approach the moment of execution, the basis tends to zero.

Futures trading

Futures are traded on exchanges such as the FORTS exchange in Russia, or the CBOE in Chicago, USA.

Futures trading enables traders to take advantage of numerous benefits. These include, in particular:

• access to a large number of trading instruments, which allows you to significantly diversify your asset portfolio;
• the futures market is very popular - it is liquid, and this is another significant plus;
• When trading futures, the trader does not buy the underlying asset itself, but only a contract for it at a price that is significantly lower than the value of the underlying asset. We are talking about warranty coverage. This is a kind of deposit that is charged by the exchange. Its size varies from two to ten percent of the value of the underlying asset.

However, it is worth remembering that warranty obligations are not a fixed amount. Their size may vary even when the contract has already been purchased. It is very important to monitor this indicator, because if there is not enough capital to cover them, the broker may close positions if there are not enough funds in the trader’s account.

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