1.4 Futures Basics of knowledge

1.4 Futures Basic knowledge:

• One, what are futures?

  A futures contract is a standardized combination of futures exchanges that provide for the delivery of a certain quantity at a specific time and place in the future. The quantity, also known as the underlying asset, is the spot commodity corresponding to the futures contract. It can be a commodity, such as copper or crude oil, or a financial instrument, such as foreign exchange, bonds, or a financial indicator, such as a three-month peer-to-peer repurchase rate or stock index. The buyer of a futures contract is obliged to buy the corresponding indices of the futures contract if the contract expires; The seller of a futures contract is obliged to sell the corresponding item if he holds the contract at expiration. Some futures contracts do not have a physical delivery at expiration but settle at a spread, such as stock index futures. The expiration of stock index futures is the final settlement of the futures contract in hand according to some average of the spot index. Of course, traders of futures contracts can also opt to buy and sell back to offset this obligation before the contract expires. The concept of futures in the broad sense also includes options contracts traded on exchanges. Most futures exchanges list both futures and options varieties simultaneously.

  Commodity futures are one of them.

• 2 What are the types of futures? What are stock futures? What are interest rate futures? What are foreign exchange futures?

  Commodity futures can be broadly divided into two categories: commodity futures and financial futures. The main types of commodity futures can be divided into agricultural futures, metal futures (including base metals and precious metals futures), and energy futures. The main types of financial futures can be divided into foreign exchange futures, interest rate futures (including medium-term bond futures and short-term interest rate futures) and stock index futures. A stock index futures is a futures contract for a stock index item. The two parties transact at the price level of the stock index after a fixed period of time, and the delivery is made by cash settlement of the difference price. An interest rate futures is a futures contract for a bond that avoids the risk of changes in the price of a security caused by bank interest rate fluctuations. There are many types of interest rate futures, and there are many ways to classify them. Usually, interest rate futures can be divided into short-term interest rate futures and long-term interest rate futures, depending on the term of the contract. The term "foreign exchange futures" refers to a futures contract for an item denominated in a foreign exchange rate to hedge against foreign exchange risk. It is the earliest variety of financial futures. Currently, the main varieties of foreign exchange futures trading are: USD, GBP, DEM, JPY, Swiss franc, Canadian dollar, Australian dollar, French franc, Dutch guilder, etc. The main foreign exchange futures market in the world is in the United States.

  • Futures Commodity futures Agricultural futures
  • Futures on metals (basic metals, precious metals)
  • Energy futures
  • Financial futures Foreign exchange futures
  • Interest rate futures (medium to long-term bond futures, short-term interest rate futures)

• 3 What role do futures companies play in the market?

  There are many investors who trade futures, and it is naturally not possible for all of them to go directly to the exchange to trade. The vast majority of investors trade through futures companies. Therefore, futures companies are actually the intermediary for futures trading. Of course, futures firms charge traders a certain transaction fee when they trade on behalf of clients. As a broker member of a futures exchange, the main functions of a futures firm are: (1) the purchase and sale of stock index futures contracts, settlement and delivery procedures as directed by the client; (2) to manage the client's account and control the client's transaction risk; (3) To provide clients with information on the futures market, to provide trading advice, to act as a trading advisor to clients, etc.

• 4 What is the role of the China Futures Securities Monitoring Center?

  The China Futures Guarantee Monitoring Center is a non-profit corporation that is established by the approval of the State Council, the decision of the Securities and Exchange Commission of China, and registered with the State Administration of Trade and Commerce. Its jurisdiction is the Securities and Exchange Commission of China, whose activities are under the leadership, supervision and management of the Securities and Exchange Commission of China. The main functions of the monitoring center are: (1) Establish and manage a system for the security monitoring of futures securities and for the monitoring of futures securities and related operations; (2) Establishing and managing an investor inquiry service system to provide investors with information inquiries and other services related to futures settlement; (3) to encourage all the actors involved in the futures market to implement the securities depository system of the Securities and Exchange Commission of China; (4) promptly notify the regulatory authorities and futures exchanges of any issues that may affect the security of futures securities that are identified by the participants in the futures market, and cooperate with the regulatory authorities to carry out follow-up investigations and track the results of the processing as requested by the Securities and Exchange Commission of China; (5) Providing relevant information services to futures exchanges; (6) to study and improve the system of futures collateral depository, continuously improving the security and efficiency of futures collateral depository; (7) Other functions as prescribed by the Securities and Exchange Commission of China.

• 5 Commodity futures and exchanges

  The three major commodity exchanges are the Shanghai Futures Exchange, the Dalian Commodity Exchange and the Zhejiang Commodity Exchange.

  Among them, the Zhejiang Commodity Exchange was established in October 1990 as the first Chinese futures market pilot. The Dalian Futures Exchange was established in February 1993. The Shanghai Futures Exchange was officially established in December 1999.

  • Previous post The Shanghai Futures Exchange currently trades 14 futures contracts in gold, silver, copper, lead, zinc, aluminum, screw steel, thread, fuel oil, natural aluminum, petroleum asphalt, hot rolled steel, aluminum and tin, and has launched a series of trades in gold, silver and non-ferrous metals.

    Shanghai Commodity Exchange: copper aluminum cu al zn pb aluminum ru fuel aluminum fufu gold aluminum au thread aluminum wr threaded steel aluminum rb silver aluminum ag hot rolled plate aluminum HC aluminum frog BU

  • The mall Corn, corn starch, yellow soybean 1, yellow soybean 2, soybean meal, soybean oil, palm oil, eggs, fiberboard, plywood, linear low-density polyethylene, polyethylene, polypropylene, coke, coke coal and iron ore are currently traded on the Dalian Commodity Exchange in 16 futures varieties.

    Commodity exchanges in Dalian: soybean meal a soybean meal m soybean oil peppery corn meal c LLDPE pepperl palm oil pepper p PVC pepperv coke pepperj coke coal pepperjm; iron ore phosphorus fiberglass board fb polypropylene ppp egg pepperjd aluminum board bbp pjr

  • Shopping mall The commodities currently traded on the Zhejiang Commodity Exchange are common wheat, high-quality durum wheat, morning wheat, evening wheat, cotton, cotton, oilseed, safflower oil, cabbage, white sugar, power coal, methanol, PTA, glass, cast iron and aluminum.

    The state's commodity exchange: white sugar syrup SR PTA TA cotton syrup CF oat syrup WH pumpkin syrup PM early rice RI glass syrup FG cabbage RM cabbage RS oilseed oil OI methanol ME powered coal cabbage TC

    

• 6 Standard Compound

  In contrast to spot commodities, spot commodities are actually tradable commodities, and futures are not primarily commodities, but rather standardized tradable contracts for commodities such as cotton, soybeans, oil and financial assets such as stocks and bonds. The delivery date of futures can be a week, a month or even a year later.

  A futures contract is a standardized composition of futures exchanges that stipulate the delivery of a certain quantity and quality of commodities at a specific time and place in the future.The main force contractThis is the largest volume of transactions and holdings, which is active, and the sub-main contracts of the main contract can also be active.

  The object of futures trading is not the commodity itself, but the standard compound of the commodity. The futures exchange develops a standard compound that specifies the type, quantity, unit of quantity, quality grade, place of delivery, and time of delivery of the commodity. Trading purposes can be divided into hedging and speculation.

  The difference between futures and stocks is that stocks are 100% collateralized, whereas futures are 5% to 20% collateralized. Investors can make small bids, 10% collateralized, which is already 10 times leverage. Stocks are a one-way operation, you have to buy and sell first, while futures are two-way, that is, you can buy and sell first, and you can buy and sell first.

  The contents of the futures contract are approved by the National Securities Regulatory Commission and are uniformly defined by the exchange. The contents are fixed, except for the price. Contract units: The minimum unit of sale per purchase is one hand. Currently, the number of commodity futures metals per hand is 5 tons, and agricultural futures 10 tons per hand.

  1, Contract Value: The actual value of the contract per hand. In copper terms: 5 tonnes per hand, multiplied by the current futures price is the contract value. In addition, the contract value multiplied by the collateral ratio (generally a few percent) is the amount of money to buy or sell one-handed futures. 2, Minimum price movement:, the price reflected in the futures market is how much money per ton, the current domestic futures minimum price movement is: metal class is 10 yuan/ton, each hand is 5 tons, one point change value is 50 yuan. Agricultural products class is 1 yuan/ton, each hand is 10 tons, one point change is 10 yuan. 3, daily price limit: to limit the price fluctuation. The domestic period stipulates a certain daily price decline, for the price drop of 3%. 4, month of contract: metal category is 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and December contracts. Agricultural products category is 1, 3, 5, 7, 9, and November contracts. 5, last trading day: The futures contract that the investor specifically buys and sells is fixed-term, generally for about a year, and the day of expiration is the last trading day. This is when the settlement must be made, otherwise it is delivered. Retailers cannot deliver, only settlement can be understood.

  This contract corresponds to a titration of the titration of a commodity, colloquially known as a titration of the titration of the futures, which is represented by a contract symbol. For example, CU0602 is a futures contract symbol that indicates a contract delivered in February 2006 and the titration is an electrolytic copper.

• 7 Some basic terms

  Buy more: buy futures, trade more.

  Selling short: Selling futures, trading short.

  Opening a position: Starting a futures contract. Opening a position is buying or selling an index. Opening a position is selling or selling an index.

  Holding: The number of outstanding contracts held by a trader.

  Hedging: A trader who trades in the opposite direction to the contract he holds, also known as hedging. Most traders learn about the contract in a hedged manner before the contract expires, and only a few contracts require physical delivery.

  Plateau: to flatten today's listing, to flatten the historical listing. Only the Shanghai Futures Exchange in China makes a strict distinction between the plateau and the plateau. The listing can only be flattened with the plateau and the plateau instructions.

  To make a profit, that is to open more orders, to fill is to open and buy. When this order is to go out, then to open and sell. To make a fall, that is to open and empty, to fill is to open and sell. When this order is to go out, then to open and buy.

  The whole process of futures trading can be summarized as open, holding, placing, or physical trading. Opening refers to a trader buying or selling a certain number of new futures contracts. In futures trading, one party wants to buy and must correspond to the other party. If A wants to buy a 10-handed soybean contract and B wants to sell a 10-handed soybean contract, then both of them are in the right transaction. Both of them open simultaneously, and the purchase and sale contract is of the same variety, equal in number, is called double open. If both positions are opened at the same time, then the holding volume is increased. The above says that A and B buy and sell the same amount, that is, B sells and is bought by A. If A wants to buy 12 hands of soybeans, and B still sells 10 hands, then A and B can only trade 10 hands, but A will buy the remaining 2 hands. You also need someone to sell two hands. So again, let's say that you sell two hands at this time, and note that these two hands are used for the same position, so the three hands are exactly done. Of course this three-hand transaction is done at the same time. The 12 handed soybean contracts in the list, 10 of which are sold to B, B is used to open the position, and the other two are sold to A, A is used to close the position. The trading behavior of the three methyl ethers is called over-open. The difference is that more openings contain a portion of the single used for placement, and the number of singles bought into the openings is greater than the number sold into the openings, so it is called more openings. If B wants to sell 12 hands, and A only wants to buy 10, then there is also a chance to buy 2 hands. The analogy is empty. Open is the number of singles sold in the open position is greater than the number of bought in the open position, sold more, so it is called empty. Multi-change: Multi-head switching, refers to the old multi-selling the placement, new multi-buying the opening position Free swap: Free swap, refers to buying an old free position and selling a new free position Double-open: a transaction in which both the buyer and the seller buy more than one position and sell less than one position. Biplan: The deal between the long-haul seller and the short-haul buyer is agreed upon; i.e. both buyers and sellers are in the same position Multi-open: Open both empty and multi-head positions at the same time, trading at multi-head declaration prices, reflecting the initiative of the buyer Open: Multi-headed and empty-headed simultaneously. Transaction at empty-headed declaration price, reflecting dynamic bidding Plain: empty headed active placement

• 8 Futures examples

  Suppose a customer believes that the price of soybeans is going to fall and sells a one-handed futures contract at 3,000 yuan/ton (about 9% collateral for 10 tons of soybeans per hand) and then the price drops to 2,900 yuan/ton, the customer buys a one-handed spot and completes the transaction. The value of the currency is: 3000 tons (2900) × 10 = 1000 yuan. All of the above transactions are reflected in the accounts, and the amount is approximately: 3000 x 10 x 9% = 2700 yuan, and the transaction fee should be deducted of about 10 yuan.

• 9 What is the meaning of the term "boom"?

  A futures bust is a negative equity position in a futures account, which means that the collateral is not only fully lost but also in arrears. Normally, a bust would not occur under a daily no-debt settlement system and a compulsory settlement system. However, in some exceptional circumstances, such as when there is a market reversal, it is very likely that an account with a larger holding position and in the opposite direction will bust.

  Under normal circumstances, under the system of daily debt-free settlement and the compulsory balancing system, the futures boom will not happen. For example, if you have a guarantee of 10,000 yuan in your futures account, you spend 10,000 yuan to do more than one handful of soybean oil, that is, the entire stock is operated, if you do the right way, the balance of the account will naturally increase, if you do the wrong way, the market will fall, for example, if the loss is 100 points or 1,000 yuan, the futures company will notify the additional guarantee of 1,000 yuan, this is enough to continue to have a handful of soybean oil, if you can not add the guarantee in time, the loss continues to expand, to the 30% level of the guarantee, that is, a loss of about 3,000 yuan, the exchange will implement a forced balancing mechanism, so you can only lose 3,000 yuan, the remaining account is 7,000 yuan.

  For example, if the ratio is too high, the next day the third day the continuous opening and closing of the fall, trying to break even and stop the loss, such a situation will occur. But in reality, such a situation is rare, I was involved in futures 10 years to meet such an extreme situation, which was during the 2008 financial crisis.

  In the event of a bull market, investors need to make up for losses, otherwise they will face legal action. To avoid this situation, it is necessary to specially control positions and avoid full positions, like stock trading. To reduce the risk of a bull market, exchanges have also introduced new rules, if the market has a third consecutive fall, a forced reduction mechanism will be implemented.

  As long as everyone understands what a bull market means, they will not be afraid of futures, learn to invest scientifically, strictly control positions and manage scientific funds, so that they can survive in the market for a long time.

• 10. Investing in futures starts with an understanding of the forced equilibrium

  The financial market is a tempting market, and futures have also created countless wealth myths with their unique collateral transactions and T + 0 transactions. For this reason, futures have become a new popularity in addition to traditional investment methods such as mutual funds, stocks and real estate, especially since April 16, 2010, with the launch of stock futures, which are increasingly accepted and favored by investors. However, many first-time investors are in a hurry to complete, overbought, and often face the risk of being forced to hold parallel positions, due to a lack of awareness of the risks of futures. What do you mean? So what is a forced equilibrium? What are the conditions for a forced equilibrium? How are the consequences of a forced equilibrium determined?

  What is forced equilibrium?

  The term forced equilibrium refers to the position holder's position being forced to close by a third party (a futures exchange or a futures company), also known as being underwritten or underwritten. There are many reasons for forced equilibrium in futures trading, such as the failure of the client to add trading collateral in a timely manner, violation of trading position limits, regulations, policies, temporary changes in trading rules, etc. The most common type of forced equilibrium occurs due to the client's own insufficient trading collateral. Specifically, it refers to the client's inability to provide the required collateral for holding a futures contract, but also to its failure to comply with the notification of the futures company.

  Examples

  In December 2015, Mr. Liu signed a futures brokerage contract with a futures company. The agreement on risk control and forced equilibrium was: When Mr. Liu's holding risk is greater than 100% or the collateral is below the specified standard, Mr. Liu needs to supplement the collateral or reduce the position appropriately, otherwise the futures company has the right to implement forced equilibrium. After the contract was signed, Mr. Liu opened a futures account with the futures company and allocated 1 million yuan to its collateral account. On January 4, 2016, Mr. Liu purchased an online trading stock through IF1601 and sold the stock to a total of about 7 billion yuan. (Stock futures are a type of futures, the exchange is a central bank)

  The case is not complicated and the main focus is on whether the forced liquidation of the futures company is in accordance with the law and whether Mr. Liu should be held liable for damages.

  Conditions for the application of forced balancing

  For the futures company, if the client does not add collateral, the futures company enjoys the right to compulsorily settle, but this right is subject to certain restrictions when exercised. According to the provisions of Article 41 of the Provisional Regulation on the Management of Futures Trading and other regulations, compulsory settlement must have the following conditions: (1) the client's trading collateral is insufficient, the risk control bottom line has been exceeded, and the market continues to develop in the direction of holding the collateral. This is the basic premise for the futures company to implement compulsory settlement in order to protect its own interests and prevent the expansion of losses.

  Consequences of forced parity determined

  Through analysis, it is easy to conclude: on the one hand, Mr. Liu failed to add the corresponding collateral or initiate a reduction in the position in time when the futures company received the additional collateral notification, triggering various elements of the forced break-even, so the forced break-even behavior of the futures company was legal. On the other hand, according to the provisions of Article 39 of the Provisions of the Supreme People's Court on the Hearing of Certain Issues in Futures Disputes, the futures company closed all of Mr. Liu's holdings, attributed to the oversized break-even behavior, and the futures company assumed corresponding responsibility for the part of Mr. Liu's oversized break-even. What do you mean? The above case has left us with a profound lesson: in the case of sharp fluctuations in the market, investors' overbought trades are the culprits that lead to forced liquidation, therefore, investors should reasonably control their positions in the futures trading process, and not try to eat a fat mouth, to avoid the tragedy of being forced liquidated by the futures company.

• 11 Lifting water

  Baseline = spot price - futures price, baseline > 0, spot price rise, futures price drop. Conversely, such as. For futures contracts for the near term, see also price comparison, high price rise, low price drop.

  Explanation of the concept

  In the futures market, the price of the spot commodity is lower than the price of the futures contract, the basis difference is negative, the price of the long-term futures contract is higher than the price of the short-term futures contract, this situation is called the bullish futures price surge, also called the bullish spot price surge, the long-term futures price exceeds the part of the near-term futures price, called the bullish spot price surge (CONTANGO); if the price of the long-term futures contract is lower than the price of the short-term futures contract, the price of the spot commodity is higher than the price of the futures contract, the basis difference is positive, this situation is called the bullish spot price surge, or the bullish spot price surge, the price of the long-term futures contract is lower than the part of the short-term futures price, called the bullish spot price surge (BACKWARD)).

  Futures quotes can be used to indicate the price relationship between the spot price of the commodity and the month of delivery, or the price relationship between the replacement delivered in physical delivery and the standard delivery facility, or the price relationship between different delivery locations of the commodity. The quotes reflect the specific price relationship between a commodity and the standard object under certain conditions, so the change in the quotes has a very large impact on the futures price, and investors are also very sensitive to the change in the quotes.

  Substance

  Historically, the way of trading has been constantly evolving, first as a cash one-handed commodity spot trade, later with the establishment of a credit system, the long-term spot trade appeared, beginning in 1870 cotton futures trading. In the current situation in the United States, there is no futures market and the spot market often talked about in our academic community, the reality is: the price formed by the futures exchange is the reference price of the spot circulation, the spot circulation is only a logistics system, due to the production, quality is different, when trading commodities, both parties need to talk about a raise in the futures price, that is:

  Trading price = futures price + raise of water

  In other words, the futures market and the spot market are only a concept that is distinguished in academic research, in the actual operation of the two as a whole market, futures pricing, spot flow, both of them play an organic role in order to make the market mechanism work properly.

  Liquidity is a link between the price of the spot market and the price of the futures market. Liquidity information is very useful for the function of the futures market's price discovery and price discovery. A high liquidity indicates a tight supply and a lack of supply and demand, and investors can expect the price of the futures to rise in the near future. If the spot market is high, it indicates that the supply of the spot market is sufficient, demand is weak, and the price of the futures is likely to continue down the line. Liquidity may occur at any time of the contract in different time periods, because the liquidity structure actually reflects the supply and demand relationship in a specific time period.

  This is because the factors affecting the uptick are quite complex and the uptick is always fluctuating. The price of the futures market and the spot market are often influenced by the same factors, but the changes in the uptick are often different, either in direction or in magnitude. The uptick is much smaller and relatively stable compared to the uptick in the spot price or the futures price. We can use historical price relationships and actual costs to predict their level.

  I'm not sure what to do.