A futures contract is a financial contract to buy or sell an underlying security at a specified future date at a specified price. Trading is the sale of futures contracts and futures contracts for the purchase. Futures contracts may be issued such a number of financial instruments and commodities, equities, currencies, etc.
Compared to trading directly, there are some benefits of trade> Futures instead.
(1) Benefits: You will be able to control large amounts of the financial instrument with small amounts of money. An investor can pay a fraction of the underlying value of the monitoring of contracts (including the margin). In this way, the investor has access to 100 ounces of gold for a few hundred dollars.
(2) minimal transaction costs: Due to the liquidity of the futures market, transaction costs are verytherefore minimal competitive in general.
(3) "short circuit" and tax advantages: Another advantage is that investors "short" the contract term or the seller. This technique can be used to make money if the conviction is that the price of the device is closed. It could also be invested tax benefits than normal may be present depending on the tax laws.
Some disadvantages
Leverage is a double-edged sword. In the event that an investorThe purchase of a futures contract by a margin payment and the underlying price falls, then the buyer could lose more than your initial investment in the transaction. E 'is therefore very important to understand why trading futures is considered crucial in this risky.
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