1. What are futures?
Futures correspond to spot prices and are derived from spot prices. Futures usually refer to futures contracts . Futures are completely different from spot goods. Spot goods are real goods (commodities) that can be traded. Futures are not mainly goods, but are represented by certain mass products such as cotton, soybeans, oil, etc. and financial assets such as stocks, Bonds, etc. are standardized tradable contracts. Therefore, the subject matter can be a certain commodity (such as gold, crude oil, agricultural products) or a financial instrument.
The delivery date of futures can be one week later, one month later, three months later, or even one year later.
A contract or agreement to buy or sell futures is called a futures contract.
The place where futures are bought and sold is called the futures market.
Futures trading is the buying and selling of futures contracts, which is derived from forward spot trading and is a trading method corresponding to spot trading. The futures market is a place for futures trading. It is developed from the forward spot market and is a more organized and standardized market form corresponding to the spot market.
2. Questions
2.1 Transaction
1) Trading direction
Futures can be bought first and then sold, or they can be sold first and then bought.
Among them, buying first and then selling refers to "buying long", and selling first and then buying refers to "short selling".
(2) Trading behavior
The first transaction in futures is to "open a position", which can be "long" or "short".
At the same time, futures are "long" and then sold, or "short" first and then bought, and the subsequent selling or buying transaction is "closing the position."
It can be seen that investors have two operating methods for futures trading: long and short, as follows:
(1) When it is predicted that the price will rise, if you open a bullish position, it is called "buy long", and then sell to close the position after the price rises.
(2) When it is predicted that the price will fall, you will sell to open a position, which is called "short selling", and then buy to close the position after the price drops.
2.2. What does short futures order mean?
A short futures order means that you are not optimistic about the market outlook, so you go short.
There is also a buy (long) order in futures, which means that you are optimistic about the future and think it will rise, which is also called a long order.
It represents the investment direction of your position, whether it is bullish or bearish.
For example: Assume that the price of cotton futures is 14,200 yuan/ton, and 1 lot is 5 tons. Xiao Ming opens a short order for
1 lot of cotton futures, which means selling 5 tons of cotton futures.
If Xiao Ming wants to close this transaction, he has two options: either hand over 5 tons of cotton spot to the buyer when the time comes, or buy and close 1 lot of cotton futures to hedge and close the transaction.
You may ask, how can you sell A when you don’t have A in hand?
In fact, short selling is a kind of credit transaction. Short selling of futures is a contract , which promises to deliver the goods according to the contract at the time. Short selling is actually the act of buying and selling through credit transactions. Inversion in time and space.
2.3 Virtual position and real position
Since many positions in the futures market are not for delivery, we define firm orders as positions used for delivery and virtual orders as positions other than delivery .
3. Reference documents
Introductory knowledge about futures: - Zhihu
How much do you know about futures (1) - The troubles of wheat farmers - Zhihu
What does short futures order mean? How to operate? - Know almost
What does the futures contract multiplier mean? - Know almost