home Pipes and fittings Settlement futures example. In simple words: what is a futures? Stock futures

Settlement futures example. In simple words: what is a futures? Stock futures

Futures or futures contract are one of the most popular instruments on the stock exchange. Futures trading occupies a significant segment of the exchange market.

The secret to the popularity of this financial instrument lies in its high liquidity and the ability to choose from a large number of investment strategies. For novice traders, this segment of exchange trading seems complex and risky, but for experienced players it offers many opportunities, including hedging risks.

Futures contract. What it is?

So what are futures? The term comes from the English word future, meaning “future”. This emphasizes the fact that the contract is concluded for the actual completion of a transaction in the future.

Futures contract is an agreement in which the current market price of a commodity or asset is fixed, but the transaction itself will be carried out on a specific date in the future

The essence of the agreement is that the parties to the transaction come to a common opinion on the price of the goods and at the same time agree to defer payments under the contract. This type of agreement is very convenient for each of the parties, since it insures against situations when some serious changes in the market situation provoke fluctuations in market prices.

The purpose of such a contract is to attempt to reduce risks, maintain planned profits and obtain a guarantee of delivery of goods. A futures contract relieves a market participant from urgently searching for someone to sell or buy a commodity from. The exchange acts as a guarantor of fulfillment of the terms of the transaction.

Example of a futures contract

A traditional example of a futures contract would be a transaction between an agricultural producer and a buyer. The farmer speculates how much he wants to sell his goods for in order to recoup the costs of growing and make a profit. If this amount is approximately equal to the current market value, he signs a futures contract with the buyer for the supply of agricultural products at the current price, but after a certain period of time - for example, 6-9 months, that is, as long as it takes to grow the crop.

If the price of products falls during this time (for example, the year will be fruitful and there will be an oversupply of products), the manufacturer will nevertheless be able to sell the goods at the price specified in the contract. But even in the opposite situation, if there was a bad year and product prices rose, the manufacturer will have to sell at a price that is now unprofitable, but pre-specified in the contract. The whole essence and meaning of a futures contract is to fix the price of a commodity.

The assets of a futures transaction, in addition to real goods, are stocks, bonds, currency pairs, interest rates, stock indices, etc.

Futures trading. What are the advantages?

The high popularity of futures on the stock exchange is not accidental; the advantages of this financial instrument are as follows:

The ability to widely diversify a trader’s securities portfolio due to access to a large number of instruments.
High liquidity of contracts and the ability to choose different financial strategies: risk hedging, various speculative and arbitrage operations.
The commission for purchasing futures is lower than on the stock market.
A guarantee of usually no more than 10% of the value of the underlying asset allows you to invest not the full value, but only a part, in futures contracts, but at the same time use the leverage that arises when using a futures contract.

However, the investor needs to keep in mind that the amount of the collateral may vary throughout the entire life of the contract, so it is important not to lose sight of futures quotes, monitor these indicators and close positions on time.

The futures price is also unstable. Its fluctuations allow you to track the futures chart. During the circulation period, the value constantly changes, although it depends directly on the value of the underlying asset. The situation when the futures price exceeds the value of the asset is called “contango,” while the term “backwardation” means that the futures turned out to be cheaper than the underlying asset. On the expiration date, there will no longer be such a price difference between the futures and the asset itself.

Types of futures contracts

There are two main types of futures contracts: settlement and delivery.

Futures contracts gave birth to the commodity market. The participants in the transaction agreed on a price that suited both parties and on a deferred payment. This type of transaction guaranteed both parties protection from sudden changes in market sentiment. Therefore, initially only supply contracts were in force, that is, those involving the delivery of real goods.

On the current Russian derivatives market there are delivery contracts that ensure the delivery of shares directly, but there are quite a few of them. These are futures for shares of Gazprom, Sberbank, Rosneft, for some types of currencies and options

Today, futures contracts are primarily settlement contracts and do not impose an obligation to deliver commodities. Traders prefer to trade assets that are more convenient for them (currencies, RTS index, shares, etc.). The fundamental difference between settlement futures and delivery ones is that delivery of the commodity or underlying asset does not occur on the last day of the contract. On the expiration date, profits and losses are redistributed between the parties to the contract.

The conditions for concluding a futures contract are standard, they are approved by the exchange. In addition to this scheme, personal conditions (or specifications) are prescribed for each asset, which includes the name, ticker, type of contract, size/number of units, date and place of delivery, method, minimum price step and other nuances. More detailed specifications of any futures on the Forts market can be found on the Moscow Exchange website.

The difference between futures and options is that the former oblige the seller to sell an asset, and the buyer to purchase an asset in the future at a fixed price. The guarantor of the transaction in both cases is the exchange.

Today, exchange trading experts recognize that in many ways it is futures contracts that set the pace for economic development, setting the bar for supply and demand in the market in advance.

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Surely you have already noticed on various financial websites, where there are currency quotes and economic news, a special section “Futures”. At the same time, there are a large number of their varieties. In this article we will talk about what Futures are, why they are needed and what they are.

1. What is Futures

Futures(from the English "futures" - future) - this is one of the liquid financial instruments that allows you to buy/sell goods in the future at a pre-agreed price today

For example, if you buy December futures in the summer, you will receive delivery of this product in December at the price you paid in the summer. For example, these could be stocks, currency, goods. The moment of completion of the contract is called expiration.

They have become widespread since the 1980s. Nowadays, Futures are just one of the tools for speculation for many traders.

What are the objectives of futures

The main purpose of futures is to hedge risks

For example, you own a large block of shares in a company. There is a decline in the stock market and you have a desire to get rid of them. But selling such a large volume in a short period of time is problematic, since it can cause a collapse. Therefore, you can go to the futures market and open a bearish position.

Also, a similar scheme is used during periods of uncertainty. For example, there are some financial risks. They may be associated with elections in the country, with some uncertainties. Instead of selling all your assets, you can open opposing positions in the futures market. Thereby protecting your investment portfolio from losses. If the futures fall, you will make money on it, but you will lose on the stock. Likewise, if stocks rise, you will make money on this, but will lose on futures. It's like you're maintaining the status quo.

Note 1

In textbooks you can see another name - “futures contract”. In fact, this is the same thing, so you can say it as you prefer.

Note 2

A forward is very similar in definition to a futures, but is a one-time transaction between a seller and a buyer (a private arrangement). Such a transaction is carried out outside the exchange.

Any futures must have an expiration date, its volume (contract size) and the following parameters:

name of the contract
code name (abbreviation)
type of contract (settlement/delivery)
contract size - the amount of the underlying asset per contract
terms of the contract
minimum price change
minimum step cost

No one issues futures like stocks or bonds. They are an obligation between the buyer and the seller (i.e., in fact, traders on the exchange themselves create them).

2. Types of futures

Futures are divided into two types

Calculated
Delivery

With the first ones everything is simpler, in that nothing will be supplied. If they are not sold before execution, the transaction will be closed at the market price on the last day of trading. The difference between the opening and closing prices will be either profit or loss. Most Futures are settlement.

The second type of futures is deliverable. Even from the name it is clear that at the end of time they will be delivered in the form of a real purchase. For example, it could be stocks or currency.

Essentially, Futures are an ordinary exchange instrument that can be sold at any time. It is not necessary to wait for its completion date. Most traders strive to simply earn money, and not actually buy something with delivery.

For a trader, futures on indices and stocks are of greatest interest. Large companies are interested in reducing their risks (hedge), especially in commodity supplies, so they are one of the main players in this market.

3. Why are Futures needed?

You may have a logical question: why are Futures needed when there are base prices. The history of their appearance goes back to 1900, when grain was sold.

To insure against strong fluctuations in the cost of goods, the price of future products was set in winter. As a result, regardless of the yield, the seller had the opportunity to buy at the average price, and the buyer had the opportunity to sell. This is a kind of guarantee that one will have something to eat, the other will have money.

Futures are also needed to predict the future price, or more precisely, what the trading participants expect it to be. The following definitions exist:

Contango - an asset is trading at a lower price than the futures price
Backwardation - an asset is trading at a higher price than the futures price
Basis is the difference between the value of the asset and the futures

4. Futures trading - how and where to buy

When purchasing futures on the Moscow Exchange, you must deposit your own funds for approximately 1/7 of the purchase price. This part is called "guarantee security". Abroad, this part is called margin (in English “margin” - leverage) and can be a much smaller value (on average 1/100 - 1/500).

Entering into a supply contract is called "hedging".

In Russia, the most popular futures is the RTS index.

You can buy futures from any Forex broker or on the MICEX currency section. At the same time, free “leverage” is provided, which allows you to play for decent money, even with a small capital. But it is worth remembering the risks of using your shoulder.

Best Forex brokers:

The best brokers for MICEX (FOTS section):

5. Futures or Stocks - what to trade on

What to choose for trading: futures or stocks? Each of them has its own characteristics.

For example, by purchasing a share you can receive annual dividends (as a rule, these are small amounts, but nevertheless, there is no extra money). Plus, you can hold shares for as long as you like and act as a long-term investor and still receive at least a small percentage of profit every year.

Futures are a more speculative market and holding them for more than a few months hardly makes sense. But they are more disciplined for the trader, since here you have to think about a shorter period of play.

Commissions for transactions on futures are about 30 times lower than on stocks, and plus, leverage is issued free of charge, unlike the stock market (here a loan will cost 14-22% per annum). So for lovers of scalping and intraday trading, they are perfect.

In the stock market, you cannot short (go short) some stocks. Futures do not have this problem. You can buy both long and short all assets.

6. Futures on the Russian market

There are three main sections on the MICEX exchange where there are futures

Stock
- Shares (only the most liquid)
- Indices (RTS, MICEX, BRICS countries)
- Volatility of the MICEX stock market
Monetary
- Currency pairs (ruble, dollar, euro, pound sterling, Japanese yen, etc.)
- Interest rates
- OFZ basket
- RF-30 Eurobond basket
Commodity
- Raw sugar
- Precious metals (gold, silver, platinum, palladium)
- Oil
- Average price of electricity

The name of the futures contract has the format TICK-MM-YY, where

TICK - ticker of the underlying asset
MM - month of futures execution
YY - futures execution year

For example, SBER-11.18 is a futures contract on Sberbank shares with execution in November 2018.

There is also an abbreviated futures name in the format CC M Y, where

СС - short code of the underlying asset of two characters
M - letter designation of the month of execution
Y - last digit of the year of execution

For example, SBER-11.18 - futures for Sberbank shares in the abbreviated name looks like this - SBX5.

The MICEX has adopted the following letter designations months:

F - January
G - February
H - March
J - April
K - May
M - June
N - July
Q - August
U - September
V - October
X - November
Z - December

Before a futures contract is put into circulation, the exchange determines the trading conditions for it, which are called “specifications”. This document contains information about the underlying asset, the number of units of this asset, the expiration (execution) date of the future, the cost of the minimum price step, etc. An example of such a specification is the description of the RTS Index futures.

There are two types of futures - settlement and delivery. In the case of the latter, physical delivery of the underlying asset is allowed - for example, oil or currency. It happens that such delivery is not implied and the futures are settlement. Then, at the time of its expiration, the parties to the transaction receive the difference between the contract price and the settlement price on the expiration day, multiplied by the number of available contracts. Index futures are referred to as settlement ones, since they cannot be delivered.

When trading futures contracts, the value of the position is recalculated daily in relation to the previous day and money is written off/credited to the investor’s account. That is, the difference between the purchase or sale price of a futures contract and the estimated expiration price is credited to the trader’s account daily - this is the concept of variation margin.

Futures have an expiration date, which is encoded in their name. For example, in the case of the RTS index, the name is formed as follows: RTS -<месяц исполнения>.<год исполнения>(for example, the RTS-6.14 futures will expire in June 2014).

How it works

As is clear from the history of futures contracts, one of their main purposes is insurance against financial risks (so-called hedging) - for this purpose, this instrument is used by real suppliers or consumers of the commodity that is the underlying asset. Experienced traders and investors use futures (often settled) for speculation and profit.

Futures are a fairly liquid instrument, which, however, is unstable and, accordingly, carries considerable risk for the investor.

When a futures contract that one trader has sold to another comes due, there are generally several possible outcomes. Financial balance the parties may not change, or one of the traders may make a profit.

If the price of a financial instrument has increased, then the buyer wins, but if the price falls, then the seller celebrates success, who most likely was counting on this. If the price of the instrument does not change, then the amounts in the accounts of the participants in the transaction should not change.

Unlike an option, a futures is not a right, but an obligation on the part of the seller to sell a certain amount of the underlying asset in the future at a certain price, and for the buyer to buy it. The guarantor of the execution of the transaction is the exchange, which takes insurance deposits (collateral) from both participants - that is, you do not need to pay the entire futures price at once, only the collateral is frozen in the account. This procedure is performed on both the buyer's account and the seller's account in the transaction.

The amount of collateral (GS) for each contract is calculated by the exchange. At the same time, if at some point the funds in the investor’s account become less than the minimum acceptable level of GO, the broker sends him a request to replenish the balance, but if this does not happen, then some of the positions will be closed forcibly (margin call). To avoid such a situation, the trader must keep an amount of money in the account that is quite significantly larger than the amount of security - after all, if the price of the futures changes significantly, then his funds may not be enough to cover the position. The collateral is frozen in the merchant's account until the transaction is settled.

At the time of writing, the current value of the guarantee collateral charged to clients wishing to trade futures on the RTS index is 11,064.14 (more details). Accordingly, if a trader has 50,000 rubles in his account. That is, the trader will be able to buy only 4 such contracts. In this case, an amount of 44,256.56 rubles will be reserved. This means that only 5,743.44 rubles of free funds will remain in the account. And if the market goes against a certain number of points, then the expected loss will exceed the available funds, and a margin call will occur.

As you can see, a lot depends on the futures price, which can change under the influence of a variety of factors. Therefore, this exchange instrument is classified as risky.

Why do we need speculation and futures?

Very often, people who are not very familiar with the specifics of the stock market confuse it with Forex (although this is not particularly fair) and brand it as some kind of “scam” where speculators fleece gullible newcomers. In reality, everything is not so, and stock speculation plays an important role in the economy. Speculators buy low and sell high, but in addition to the desire to get rich, they influence the price. When the price of a stock or other exchange instrument is undervalued, a successful speculator buys - which causes the price to rise. Similarly, if an asset is overvalued, then an experienced player can make a short sale (selling securities borrowed from a broker) - such actions, on the contrary, help reduce the price.

When there are many stock market professionals who look at the stock market from different angles and use a large amount of data to analyze both the situation in the country and about a specific company, their decisions have an impact on the entire market as a whole.

In the same way, to imagine the role of futures, it is worth imagining what would happen if this financial instrument as such did not exist. Let's imagine that an oil producing company is trying to predict the required production volumes. Like any business, the company wants to achieve maximum profit with minimal risk. In this situation, you cannot simply extract as much oil as possible and sell it all. It is necessary to analyze not only the current price, but also what level it may be in the future.

At the same time, those who extract, transport and store oil are not necessarily analysts and have access to the most complete forecasts regarding the possible price of oil. Therefore, the producing company cannot know exactly how much a barrel of oil will cost in a year - $50, $60 or $120 - and produce the corresponding volume. To get a guaranteed price, the company simply sells futures to minimize risk.

On the other hand, the stock speculator from the example above may consider that the price of a particular futures is too high or low, and take appropriate action, leveling it to a fair price.

At first glance, the importance of setting a fair price in the market does not seem so necessary, but in fact it is extremely important for the fair use of society's resources. It is on the stock exchange that capital is redistributed between countries, economic sectors and enterprises on the one hand, and various groups of investors on the other. Without the stock market and the instruments with which it functions (including derivatives), it is impossible to effectively develop the economy and meet the needs of each specific member of society.

Futures (futures contract) is a derivative financial instrument, a standard fixed-term exchange contract for the purchase and sale of an underlying asset, upon the conclusion of which the seller and buyer agree only on the price level and delivery time. The remaining parameters of the asset (quantity, quality, packaging, labeling, etc.) are specified in advance in the specification of the exchange contract. The parties bear obligations to the exchange until the futures are executed.

A futures is an agreement to fix the conditions for the purchase or sale of a standard quantity of a certain asset at a specified date in the future, at a price set today. It is generally accepted that more than two business days pass between fixing the terms of a transaction and the execution of the transaction itself.

The term futures is derived from the English word future (future) and means that an agreement has been concluded for the supply of a certain product in the future. The futures contract must indicate its execution (expiration) date, before which you can either free yourself from your obligations by selling (if there was initially a corresponding purchase) or purchasing (in the case of an initial sale) the futures.

Futures are one of the types of derivative financial instruments. The term “derivative” means that the price of this instrument will be correlated with the price of a specific commodity (oil, gold, wheat, cotton, etc.), which will underlie the futures contract and be the underlying one.

There are two parties involved in a futures transaction - the seller and the buyer. The buyer of a futures contract accepts the obligation to buy the asset at a specified time, and the seller of the future assumes an obligation to sell the asset at a specified time.

Both obligations relate to a standard quantity of a specific commodity, at a specific date in the future, at a price established at the time the futures are entered into.

Futures are bought and sold on an exchange in standardized units of a commodity or asset, and these units are called contracts or lots. For example, one futures contract for copper represents a shipment of this metal of 25 tons, and one contract for European currency means the purchase or sale of 100 thousand euros. If you need to buy 50 tons of copper, then two copper futures are concluded. At the same time, you cannot purchase 30 or 40 tons of copper.

Futures contracts extend rights to an underlying asset of a certain quality (the amount of impurities in the metal or the moisture content of grain).

Delivery of futures contracts takes place on a specified time(s), called the delivery day(s). It is on this day that money is exchanged for goods.

The futures price is fixed at the time the transaction is concluded and does not change for the buyer and seller until the day the contract is executed, regardless of what the prices for the underlying asset are.

A futures contract is concluded only on an exchange. It is she who develops its conditions, which are standard for each specific type of asset. In this regard, futures are highly liquid, and there is a wide secondary market for them.

The underlying asset can be:
- a certain number of shares (stock futures);
- stock indices (index futures);
- currency (currency futures);
- goods traded on exchanges, for example, oil (commodity futures);
- interest rates(interest futures).

Futures contracts have 3 general purposes:
- determine the price of the tool;
- insurance against financial risks, that is, hedging (mainly carried out by real suppliers or consumers of the instrument);
- speculation for financial gain (done by experienced traders and investors).

The history of futures.

Futures contracts first appeared between farmers and buyers of their products. Immediately, before the start of the agricultural season, farmers entered into contracts with buyers and agreed on product prices in advance. This allowed them to plan a budget for the entire season. This did not always bring great profit to the farmer, but it also helped prevent failure.
In the 1970s, futures contracts for financial instruments, stock indices and mortgages appeared. securities.
Since 1978, trading in fuel oil futures began.
Since the early 1980s, for oil and other petroleum products.
Today, futures have become very popular and these contracts for various products are traded on all world markets.

Futures market participants.

Many agents in the real sector of the economy resort to futures transactions. For example, farmers or equipment manufacturers pursue the goal of reducing risk, while others, on the contrary, take on greater risks in search of high profits. Therefore, participants in futures markets are divided into two main categories: hedgers and speculators. The hedger wants to reduce the risk, and the speculator takes risks, wanting to gain big profits. Thus, speculators provide market liquidity with their operations, allowing hedgers to insure their transactions.

TYPES OF FUTURES

There are two types of futures contracts.
A deliverable futures contract involves a transaction with a real commodity, which must be delivered to the buyer in a specified quantity within a certain period, at a price fixed on the last trading date. Such activities are regulated by the exchange, and failure to fulfill obligations by the seller (lack of goods within the specified period) entails penalties.

They are traded mainly by industrial enterprises, for which the main priority is not speculation, but the purchase and sale of goods at competitive prices. If deliverable futures contracts are purchased by companies, this is done in order to buy the necessary raw materials at favorable prices today, receive these raw materials after some time, and thereby protect themselves from rising prices.

A settlement (non-deliverable) futures assumes that only monetary settlements are made between the participants in the amount of the difference between the contract price and the actual price of the asset on the date of execution of the contract without physical delivery of the underlying asset. Typically used for hedging risks of changes in the price of the underlying asset or for speculative purposes.

Futures Specification

Before a futures contract is put into circulation, the exchange determines the trading conditions for it, which are called “specifications”. A futures specification is a document approved by the exchange, which sets out the basic terms of the futures contract. This document specifies the following parameters:
- name of the contract;
- code name (abbreviation);
- type of contract (delivery/settlement);
- contract size - the amount of the underlying asset per contract;
- margin (collateral required for futures trading);
- place of delivery (if the futures is deliverable);
- terms of the contract;
- the date when the parties are obliged to fulfill their obligations;
- minimal price change;
- cost of the minimum step.

Futures price

The main reason why many market participants enter into futures contracts is the certainty of the price that is fixed in it. This price remains unchanged under any circumstances.

The futures price is the current market price of a futures contract with a specified expiration date. The estimated (fair) value of a futures contract can be defined as its price at which an investor would equally benefit from purchasing the asset itself on the spot market and its subsequent storage until used, or purchasing a futures contract for this asset with a corresponding delivery date.

The difference between the current price of the underlying asset and the corresponding futures price is called the basis of the futures contract. Relative to the spot price of the underlying asset, a futures contract can be in two states.
1. The futures price is higher than the price of the underlying asset, this condition is called contango. In this case, the basis is positive; market participants do not expect the price of the underlying asset to fall. Typically futures contracts most of their time are traded in a state of contango.
2. Futures are trading below the price of the underlying asset; this condition is called backwardation. In this state, the basis is negative; market participants expect the price of the underlying asset to fall.

Margin- this is a guarantee deposit on the client account of the exchange, frozen at the time of the transaction. It must be contributed by futures trading participants on both sides. The exchange does not use margin; it is the key to execution of the transaction by the client. At the moment when the client has paid the amounts due for the transaction or sold his futures, the margin is returned to him. The following types of margin are used: deposit, additional and variation.

Deposit (initial) margin or margin is a refundable insurance premium charged by an exchange when opening a position in a futures contract. As a rule, it is 2 - 10% of the current market value of the underlying asset.

Escrow margin is charged to both the seller and the buyer. It is, by its nature, more of an instrument that guarantees the exact performance of the contract than a payment for the asset being sold.

Currently, the deposit (initial) margin is charged not only by the exchange from trading participants, but there is also a practice of charging additional broker security from its clients (that is, the broker blocks part of the client’s funds to secure his positions in the derivatives market).

The Exchange reserves the right to increase the collateral rates. In some cases, this results in a change in the value of the contract as smaller market participants do not have enough funds to cover the increased margin requirement and begin to close their positions, which ultimately leads to a decrease (if the long position is closed) or an increase in ( if a short position is closed) prices for them.

Additional margin may be required in the event of sharp price fluctuations in the futures market, which could destabilize the guarantee system.

The price of each futures contract is constantly changing, just like any other exchange-traded instrument. As a result, the exchange clearing center faces the task of maintaining the collateral contributed by the transaction participants in an amount corresponding to the risk of open positions. The clearing center achieves this compliance by daily calculating the so-called variation margin, which is defined as the difference between the settlement price of a futures contract in the current trading session and its settlement price the day before. It is awarded to those whose position turned out to be profitable today, and is written off from the accounts of those whose forecast did not come true. With the help of this margin fund, one of the parties to the transaction makes a speculative profit even before the expiration date of the contract. The other party suffers a financial loss. And if it turns out that there are not enough free funds in his account to cover the loss, then in this case the exchange clearing center, in order to restore the required amount of the security deposit, will require additional money (issue a margin call).

Advantages of futures:
- the futures market is transparent and protected (all companies on the market associated with such transactions are controlled by the Commodity Futures Trading Commission - CFTC (Commodity Futures Trading Commission) and the National Futures Association - NFA);
- high liquidity, the most popular are futures for blue chips and the RTS index;
- small investments (to complete a transaction, you do not need to pay for the entire contract, it is enough to pay an initial margin of up to 10%);
- real prices for goods, since trading is open;
- very low broker commission;
- a more stable situation on the market (unlike Forex);
- price control 24 hours a day.

PRACTICE OF TRADING FUTURES CONTRACTS

In order to start trading futures, you need to open an account with a broker and place on it the amount necessary to trade the selected instruments. Profits will be credited to this account, and losses will be written off from it. Depending on the exchange, you must have funds in your deposit account from 2 to 10 percent of the total value of the underlying asset underlying the futures contract.

A futures contract imposes an obligation on both parties: the seller agrees to sell and the buyer agrees to buy at the price agreed upon when signing the contract and specified in it. But in reality, the delivery of goods does not occur: the parties only receive financial profit, or suffer losses, depending on the price movement of the instrument.

Trading practice shows that the vast majority of investors' positions on futures contracts are liquidated by them during the contract's validity using offset transactions, and only 2 - 5% of contracts in world practice end with the actual delivery of the corresponding assets. Therefore, settlement - non-deliverable futures contracts (CFD - Contract For Difference) were introduced into circulation. The conclusion of such a contract means that financial settlements will be made between the buyer and seller of the futures on the expiration date of the contract, which do not involve the delivery of the asset underlying the contract.

The actual supply of goods occurs through long-established relationships that rely on the commodity market to provide a market price and to control risks.

Ticker(contract symbol). To speed up the perception of futures contracts available for trading, it is used international system stock symbols - tickers. The ticker consists of:
- designation of the exchange on which the contract is traded. For example, the abbreviation “F” belongs to the largest exchange Euronext”;
- the underlying commodity underlying the futures. For example, “BRN” is Brent oil, “I” is silver, “C” is corn;
- the period of circulation of the contract on the exchange. Months are indicated in the form of Latin letters: January – letter “F”, February – “G”, March – “H”, April – “J”, May – “K”, June – “M”, July – “N”, August – “Q”, September – “U”, October – “V”, November – “X”, December – “Z”, and the year – according to the last digit.
For example, the ticker "ZWH5" indicates a futures contract traded on the Chicago Mercantile Exchange ("Z"), for wheat ("W"), expiring in March ("H") 2015 ("5").

FUTURES EXCHANGES

There are currently about 10 major international platforms for trading derivatives. Contracts for the most popular products (there are about a hundred of them) are traded through electronic systems. They allow traders from all over the world to enter into trading at minimal cost and be able to enter into contracts as quickly as traders on the floor of the exchange. In addition, electronic systems allow trading around the clock, with one hour break, five days a week.

The world's leading futures exchanges are:
1. Chicago Mercantile Exchange (CME).
2. Chicago Board of Trade (CBOT, part of the CME Group).
3. New York Mercantile Exchange (NYMEX, part of the CME Group).
4. London International Financial Futures and Options Exchange (LIFFE, part of NYSE Euronext).
5. London Metal Exchange (LME).
6. Intercontinental Exchange (ICE).
7. Eurex.
8. French International Financial Futures Exchange (MATIF).
9. Australian Stock Exchange (ASX).
10. Singapore Exchange (SGX).

The Chicago Board of Trade is the oldest of all active exchanges. It has no equal in the number and diversification of traded instruments. The largest trading volumes pass through it, and, accordingly, contracts traded on the Chicago Exchange have the greatest liquidity. The CBOT trades derivatives for the following groups of commodities: energy and energy, currencies, stock indices, interest rates, grains, metals, timber, livestock and agricultural products.

In Russia, futures contracts are currently traded on the following exchanges:
1. Moscow Exchange.
2. St. Petersburg Stock Exchange.

Futures are often talked about a lot, but it is difficult for a novice investor to understand what it is. Which means it's difficult to use. Let's talk about what futures are in simple words.

So, securities can be primary and secondary. Primary (for example, shares, bills and bonds) are issued by joint-stock companies, financial and other organizations. Shares give the right to part of the assets and income of the issuing company, bonds are a kind of loan, where the creditor is the holder of the security. Primary securities are released to the market by issuers, and then they are traded on the stock exchange.

Secondary securities (including futures) are derivatives of primary (for example, stocks) or other underlying assets (currencies, commodities, precious metals).

Futures- fixed-term contract for the purchase and sale of an asset. This contract specifies the terms of delivery (transfer) of the asset and its cost. An asset can be any object of exchange trading.

The futures price includes the value of the asset itself. Thus, when you buy derivative securities, you also receive the right to the asset itself. It will be transferred at the end of the contract period.

Futures can change hands an unlimited number of times. Commodity and currency forwards and futures are risk management and hedging tools.

Types of futures

Futures can be settled or delivered.

In the first case, settlement is made at the end of the futures term. In the second case, the delivery of a specific product that was discussed when drawing up the contract. In Russia, only futures for shares and other securities are deliverable. A simple example of a futures contract of this type is SBRF, in which the “commodity” is Sberbank shares. In the United States, goods are also redistributed using futures. So, if you bought oil futures, barrels of oil will be delivered to you at the end of the term.

How do futures work?

To talk about futures as simply as possible, we will use a simple example.

So, on November 22, 2017, you bought futures on Gazprom shares (GAZR) for 13,355 rubles. There are a total of 100 shares in the lot, which you will receive on December 22, that is, in a month. Thus, each share, excluding commissions, will cost you 133 rubles 55 kopecks.

The shares themselves currently cost 132 rubles 7 kopecks, a lot of 100 securities will cost 13,207. Savings - 148 rubles. So, is it unprofitable to buy futures?

Not at all. At the beginning of the year, stockholders typically receive dividends, the amount of which does not depend in any way on how long the securities have been in the hands of the current owners. This means that by the end of the year, in December, the price of shares begins to rise. It is quite possible that by December 22, the moment the contract is executed, the market price of Gazprom’s primary securities will be significantly higher than both the current quotes and the rate specified in the futures contract.

So, as part of the futures contract, you paid 133 rubles 55 kopecks for one share, and at the end of December you received securities for 136 rubles. You are a winner.