Start Trading Futures with Colmex

January 20, 2016

While the futures contract specifies a trade taking place in the future, the purpose of the futures exchange institution is to act as intermediary and minimize the risk of default by either party. Thus the exchange requires both parties to put up an initial amount of cash, the margin.

In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to buy the underlying asset in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to sell the asset in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties -- the buyer hopes or expects that the asset price is going to increase, while the seller hopes or expects that it will decrease. Note that the contract itself costs nothing to enter; the buy/sell terminology is a linguistic convenience reflecting the position each party is taking (long or short).

In many cases, the underlying asset to a futures contract may not be traditional commodities at all – that is, for financial futures the underlying asset or item can be currencies, securities or financial instruments and intangible assets or referenced items such as stock indexes and interest rates.

Additionally, since the futures price will generally change daily, the difference in the prior agreed-upon price and the daily futures price is settled daily also. The exchange will draw money out of one party's margin account and put it into the other’s so that each party has the appropriate daily loss or profit. If the margin account goes below a certain value, then a margin call is made and the account owner must replenish the margin account. This process is known as marking to market. Thus on the delivery date, the amount exchanged is not the specified price on the contract but the spot value (since any gain or loss has already been previously settled by marking to market).

A closely related contract is a forward contract. A forward is like a future in that it specifies the exchange of goods for a specified price at a specified future date. However, a forward is not traded on an exchange and thus does not have the interim partial payments due to marking to market. Nor is the contract standardized, as on the exchange.

Unlike an option, both parties of a futures contract must fulfill the contract on the delivery date. The seller delivers the underlying asset to the buyer, or, if it is a cash-settled futures contract, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position can close out its contract obligations by taking the opposite position on another futures contract on the same asset and settlement date. The difference in futures prices is then a profit or loss.

Publication source
Colmex Pro information  Colmex Pro reviews

February 24, 2017
Trade Commodities With Cmstrader
CFD is a derivative financial instrument, and it is an abbreviation for Contract for Difference. CFDs are of interest to traders who want to significantly boost the amount and quality of their investments...
February 23, 2017
Gain Capital gets FXCM's US retail forex clients
Now the deal is confirmed, but the financial details have not been disclosed. The transaction is subject to final regulatory approval. It is expected to close before the end of February...
February 22, 2017
Improvements in trading terms for CFD’s on the German 30 Index
The company FIBO Group has reduced the size of the spread by 2 points for the CFD, which is based on the German 30 index...

NPBFX Rating
Orbex Rating
Exness Rating
Cms Trader Rating
FxPro Rating
FIBO Group Rating

Migesco Rating
OptionBit Rating
Empire Option Rating
First Binary Option Service Rating
UKoptions Rating
99Binary Rating