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Stock Futures Markets- A Safer Way To Buy Or Sell
The futures contracts, also known as futures stocks
, which provide a guarantee to buy or sell a stock type as in market lot (which contained a number of index of share) for a time period in future, until the last trading day is not come, a trader can hold that future contracts or sell them, if the last trading day is passed then traders account is renewed with settlement as they will cut the traders position with adding lose or profit and paid penalty information into traders account. Future contracts are traded on what are called future exchanges like the DTB (Deutsche Bores) in Europe, and the CME Group in the US. It is not direct like stock n bonds but still considered as securities having different types.Futures allows obligation to a customer to buy or sell contracts or market lot and to fulfill delivery in order to contracts term and condition and allows obligation to seller deliver the assets as buyer and seller agreed but here, the only condition is that the holders position is closed before the expiration date.
In future contacts, the profit is based on Mark to market strategy which means the value change of position will be automatically handled at the end of every trading day. Futures referred to as an instantaneous equilibrium that take into an account basic supply and demand as buy or sell orders in the market. Futures contracts have strike price than normal it is an agreement to buy or sell market lot. Futures market has some specified standards like as market lot, expiry day, price quotation, tick size, and methods of settlement. A futures contract has a pricing strategy in which the futures prices is decided by adding spot price of contracts and carrying cost of future. For example a market lot has a price of US$ 300 and the total carrying cost of lot is US$ 50, then the total price of contract, which is paid by trader, is US$ 350. In the case of single stock futures is symmetric an also the price of stock futures offered the price of underlying products. Mark to market or Fair value is a concept of GAAP (Generally Accepted Accounting principles), is used in accounting and economics as related to futures contracts pricing strategy. Futures market provides a great opportunity to get profit with less- risk means in buying or selling future contracts, a trader can earn more profit and it is less risky. It offers high leverage (5 times cash out flow); high position with less capital investment and arbitrage opportunity (means earn risk-less profit). Futures contracts may include that type of terms like-
Settlement- settlement is related to a completion of transaction.
Underlying assets- is a term which is related to a particular product like Gold.
Currency- currency is the most important part of a country as individual which makes him able to make transaction with other, like US $.
Unit amount- point out a certain quantity of asset.
Grade of products- point out the property of a product or services which can be transact.
Delivery month trading month is related to particular month of a year in which settlement will be done.
Last trading day expiry day is point out that date of a month in which a particular traction is settled.
As we earlier discuss about high leverage means in the stock futures market a trader can trade five times more than invested money. It provides arbitrage opportunity to trader by which a trader trade contracts safely and may earn profit without any risk. A futures market trader can make his/her profit double by following market trend in which a market is going on and some Stock Future Tips help him/her to find out the market trend, and volume of market and help him to gain maximum profit.
by: Dhirendra Gupta
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2024-2-20 02:55
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