AP CAPITAL

Futures

What is Futures?

Futures contracts are financial derivatives instruments. It has two main categories, Commodity Futures and Financial Futures. By entering into a standardized futures contract, the buyer and the seller agree to deliver and settle a specified quantity of the instruments at a specified time, at a predetermined price and under other specified conditions. Futures contracts are commonly traded on futures exchanges, partially traded over-the-counter.

Preventing systemic risks

Interest arbitrage

Leveraging

Interpretation of Related Terms

  • Margin

    Futures investors must deposit a certain amount of cash or securities into their accounts in accordance with the settlement rules, as a guarantee for settlement of futures contracts.
  • Position limit

    To avoid market concentration risks, major futures exchanges impose limits on the maximum number of open futures contracts that participants and their clients can hold. . Limits vary according to futures products.
  • Force liquidation

    In the event of insufficient margin or position limit breach, the futures exchange has the right to force the liquidation of relevant futures contracts.

Comparison between Futures and Stock

Stock Futures
Trading Nature Stock transfer Different market players either want to
pursue or lock in profits, with different motives
(hedging or speculation)
Margin Rules 100% of transaction value Fixed amount, mostly 3% to 10% of
contract value, depending on the
Influencing Factor Performance of listed companies,
macroeconomic policies and industry policies, etc.
The main influencing factor is the supply
and demand relationship, with more market transparency
Investment Cycle Stock is suitable for medium and long-term
investment because of its one-way operation.
Because of its two-way operational
characteristics, futures can be invested
in both bull and bear market. Short,
medium or long terms investments
can meet different needs of investors
Time Constraint None. Stock positions can be
held for a long-term
Yes. Delivery must be made on the due date.