How does the futures work out
12 / February / 20 Visitors: 61 ★★★★★
How does the futures work out
Is there life after exposure
Futures obligation to buy (sell) the underlying asset at a fixed amount and on a fixed date. When the term expires, it is up to you to decide whether to close the position yourself or to wait for expiry. Much depends on the type of fixed-term contract.
Under the terms of this contract, you receive the underlying asset of the futures. For example, if you buy a futures on Sberbank shares at the end of the contract will be the purchase of Sberbank shares.
You can highlight the following stages of operation:
Expiration of a delivery futures. Passes in evening clearing (18:45-19:00 MSK).
Purchase (sale) of the underlying asset. Occurs on the next working day after the expiry.
Enrolment (write-off) of the underlying asset. On bonds occurs the next business day after the transaction, and on shares on the second business day.
It is important to understand that a small contract price does not mean a low level of responsibility. If you have purchased a futures with delivery and forgotten about it, there may be consequences. Buying the underlying asset requires more money than buying the futures. If there are no funds for the transaction, there will be a debt, which may lead to additional fees. The same is true for opening a short position on the contract. Expenses may arise at each stage of the operation. To clarify your commission, you should check the tariffs.
Prior to the expiry, the position is closed if the purpose was to make short-term profit or the execution price was not attractive for further investment. Contracts are also used as insurance. For example, if you have a portfolio with a negative reaction to the weakening of the ruble, you can buy a futures on the currency pair. Its profit compensates for the negative impact on the portfolio.
The key difference between a settlement future and a delivery future is in the absence of purchase/sale of the underlying asset after expiry. This immediately excludes the last two steps from our list. As a result, only the financial result is credited/written off to clearing.
The operation of the settlement futures is easier and clearer, but it has nothing to do with long-term investments. This tool allows you to insure some risks, but is often used for speculative trades by traders.
There are several important points
Fast-moving market implies a lot of conditions, we will highlight the most important ones for simple trading:
After the purchase of the contract, the amount of guarantee (YO) may vary;
An option short position may close without your participation if it is "out of the money";
The put option on a futures contract usually expires 2 days before the expiration of the futures;
If the purchased option is "in the money", it can be exercised before expiry**.
Separately, it is worth mentioning the calendar spreads. It's a complicated name, but the sense of the elementary is to exchange the futures with one execution date for the same futures, but with a further execution date. Using the calendar spread is very useful when you invest in futures for long periods of time with a large number of contracts. It allows you to make one trade (exchange) instead of two sell and then buy, and vice versa. This gives you significant savings in commissions and fixing both prices at once. The method of submitting an order is the same as with any forward contract, but it can be done only by phone through traders or in the trading terminal Quik.