What are futures? How does the futures market trade? Understand finance in seconds!

​Continue to do a little white financial science knowledge today, suitable for novice friends who don’t know what futures are, old drivers can quit.

In China, in addition to stock funds, our main investment market is another one. I think you can often hear it, but it is a bit unfamiliar. What is this investment market? By the way, that is the futures trading market.

Compared with the number of participants in the billion-level stock market, futures has only tens of millions of participants. At present, it is a relatively small market in China. Many people have heard of futures trading. They only know that they can go long and short, and can increase leverage, but they have never participated in it.

So today, I will use a story as an example to popularize what futures are in an easy-to-understand manner. After reading it, I believe you will have a deeper understanding of futures trading.

First of all, let's understand what is futures?

Futures refers to the trading behavior in which the buyer and the seller do not need to deliver the physical goods at the initial stage of the transaction, but agree to deliver the physical goods at a certain time in the future. The "period" means a specified time, or a period of time. It is called "futures".

Let me tell you a story:

In ancient times, there was a man named Zhang San, an oil seller, who worked hard every day to sell oil in the market. At the beginning, the business was good, but suddenly one year, he heard everyone discussing that there might be a drought this year, and the grain harvest would be bad, so Zhang San was very worried that the price of peanuts would skyrocket, and he would not have enough money to sell oil by then Buy peanuts. So he found Li Si, a peanut seller, and wanted to use the current price of peanuts to buy a batch of peanuts in the future. He paid a deposit and signed a contract with Li Si, and Zhang San felt relieved.

Zhang San and businessman Li Si signed a contract to buy a future batch of peanuts in advance to avoid the risk of grain price changes caused by the drought. This is actually the same as futures.

Then a month later, Zhang San made a deal with businessman Li Si, and then continued to sign a contract, ordering the second batch of peanuts. Later, Zhang San wanted to open a small shop because of his marriage, and the second batch of peanuts he ordered was It doesn't work anymore. Zhang San thought to himself: I no longer need peanuts, but if I choose to default, I will lose the deposit. What should I do?

At this time, Zhang San’s neighbor Wang Wu just wanted to order a batch of peanuts. Zhang San discussed with Wang Wu. Finally, Wang Wu paid Zhang San to buy a batch of peanuts after the time stipulated in the contract. San signed the same contract with the businessman before, so Zhang San signed the contract with Wang Wu.

This is the entire trading process of the futures market:

Opening a position means that Zhang San starts to sign a contract to buy futures.

Holding a position means holding the futures until the contract expires.

Delivery means that Zhang San gives money to businessman Li Si in exchange for peanuts according to the contract.

Closing the position means that after Zhang San signed the contract with businessman Li Si again, he signed the same contract with Wang Wu before the contract expires, but this time Zhang San is acting as the seller, which is tantamount to selling the previous contract. Gave it to Wang Wu.

Through this story, I think everyone should have a clearer understanding of the basic trading methods of futures. It is very basic, and Xiaobai should be able to understand it.