Futures

Market of Futures Contracts

Securities markets let everyone realize their own personal investment strategies. Futures contracts are a prime investment instrument for a risk-tolerant investor with high targets in profitability of investments. Operation on the futures contracts market allows the increasing of investments several times over within a short time as well as testing the person’s own intuition, self-control and even luck.

NORVIK BANKA gives clients the opportunity to trade in a full range of futures contracts on the world biggest exchanges, such as the Chicago Board of Trade, Chicago Mercantile Exchange, NYMEX, LIFFE, EUREX and others.

Description of Futures Contracts

A futures contract is a standardized fixed-term exchange-traded contract to buy or sell an underlying asset. When concluding the contract, the parties only fix the price and the delivery date of an underlying asset by stating explicitly all its parameters. Settlement of a futures contract can be done in one of two ways – via physical delivery of an underlying asset and without the delivery.

Key characteristics of futures contracts:

  • Underlying asset
  • Delivery date
  • Standardized quantity in 1 lot
  • Price
  • Security deposit (initial margin)

Futures contracts are traded at Exchanges only.

Futures contracts are among most high-yield financial instruments on present-day stock markets. Futures are characterized by high level of volatility. It is important to use stop orders when trading futures.

By means of futures contracts investors have the opportunity to earn on the behaviour of market prices for the following assets:

  • oil and other energy products (fuel oil, natural gas)
  • gold and other metals (platinum, silver, copper)
  • currencies (EUR, JPY, GBP, CHF)
  • interest rates (on USD, EUR etc.)
  • stock indices (S & P 500, NASDAQ etc.)
  • agricultural goods (wheat, soybeans etc.)

Features of Futures Contracts

Dealing with futures contracts is characterized by the lack of need to make payment immediately at the purchase of asset (currency, oil etc.) as well as to perform the actual delivery of the asset upon its sale. It allows the investor to speculate only in difference of the asset price between the time of opening of the futures contract position, that is, its purchase or sale, and its closing time.

At the opening of the contract position the investor deposits to his investment account not the whole amount he is speculating on but only its insignificant part (1% to 5%), which is called a security deposit. Each day while the futures contract is open the amount of the security deposit paid by the investor is supplemented by the accumulated profit or the loss is written off depending on the movement of market price for the asset of the contract. Upon the closing of the futures contract the security deposit is returned to the investor with profit added or losses deducted.

Trade in futures contracts is available within the framework of the classic Brokerage Service and Internet Trading of NORVIK BANKA.

Key goals of investing in futures:

  • Hedging
  • Speculations for making a profit

More details about Hedging