What are futures in simple words? What are price limits in futures trading? Types of futures on the Moscow Exchange and peculiarities of the futures market. How to buy and sell futures contracts on the exchange? How much can I earn on this security?

The basic concept of futures contracts
Let’s assume that you are engaged in agriculture and know that after a while you will need seeds for planting. Now they cost 1000 rubles, but what will happen later? Suddenly the price will rise, and everything will not go according to plan? To avoid such a situation, you can make a deal with the supplier: he will sell you the necessary amount of goods at the current price at the time that is spelled out in the agreement. Thus, you become the owner of the futures.

To simplify, a futures contract is a contract that confirms that one of the parties will buy goods from the other in the future at a price determined at the time of the transaction.
How do futures work and how do they differ from other financial instruments?

The commodity that is listed in the contract is called the underlying asset, and the day it is delivered is the futures expiration date. But you will receive the commodity only if you have bought the futures delivery contract. Apart from it, there is also a settlement contract, which is also called a non-deliverable contract. Only cash settlements are made during the course of it.

Let’s look at how a settlement futures contract works using an example. Let’s assume that you have also made a transaction to purchase seeds at the price of 1000 rubles and set the expiration day – it will take place in six months. If every day the price of the commodity grows by 10 rubles, you will be paid this amount. And vice versa: if the price falls, the supplier will pay compensation equal to this amount.

Futures trading takes place on the exchange, as in the case of other financial instruments. The mechanics of their work is also similar, but there are still differences.

If securities are issued by the state or companies, then futures contracts are concluded by traders independently: on products, currencies, indices and shares of companies. This happens taking into account the general conditions and requirements that the exchange sets for all futures transactions.

Unlike securities, futures contracts cannot be held for an unlimited amount of time. Stocks can even be inherited, while all transactions in futures contracts must be closed on the expiration date.

When investing in securities, you can determine your strategy: short-term or long-term. With futures you cannot choose, because they are speculative in nature.

Since the date of execution of the contract is determined in advance, you cannot buy a futures and forget about it. At the end of the expiration, one of the parties necessarily receives compensation and the other party pays it. There is one exception: if the price of the underlying asset has not changed since the date of the transaction.

Investing in shares, you can get income not only from the profitable sale of the security, but also from the payment of dividends. With futures, there are no additional payments: the contract is concluded only for a certain commodity.
Organization of futures trading on the Moscow Exchange
Transactions with futures and options in Russia are made on the futures market of the Moscow Exchange. It develops the specifics of futures contracts, which must be adhered to by everyone who is going to conduct a transaction. Such a document must contain the following information:
full and brief name of the contract;
type of contract (settlement or delivery);
contract size
expiration date;
expiration date;
the smallest price change.
Anyone can start trading futures on the exchange, but you need to follow the necessary rules.

Make sure that you have enough funds in your account. To make a deal, it is not necessary to have the entire value of the futures in your account. It is enough to have 10-40% of its value – this amount is called a margin, which we will talk about later.

Maintain the necessary balance in the account. Every day at the moment of clearing, variation margin is deducted or accrued. Therefore, it is important that you have enough funds to settle in the event of a price change.

Clearing is a regular settlement between individuals and legal entities for services rendered or goods provided. Let’s assume that two entrepreneurs have concluded several transactions, as a result of which one of them owes the other 100 rubles, and the latter in turn – 200 rubles. They will not exchange funds due to clearing. Mutual settlement takes place: 100 rubles are deducted from 200. And only this amount is paid by the debtor.

Determine whether you are playing on the decrease or increase in the price of the asset. If you are going to profit from the growth of the value, it is called a long position or long. And if you earned from the fall of the asset, it was a short position or, as it is called in another way, a short.