INVESTOR
EDUCATION
INVESTOR
EDUCATION
Futures
Futures are a type of financial derivative that allows investors to buy or sell specific assets at an agreed price on a future date.
Some basic knowledge about futures
1. Definition: Futures are standardized contracts traded on exchanges, specifying the delivery of a particular underlying asset (such as commodities, financial instruments, etc.) on a specific future date.
2. Underlying Assets: The underlying assets of futures contracts can be commodities (such as gold, crude oil, etc.), financial instruments (such as stock indices, bonds, etc.), or other assets.
3. Exchanges: Futures contracts are traded on specific exchanges, and investors can engage in trading through brokers or online platforms.
4. Contract Specifications: Each futures contract has specific contract specifications, including contract size, delivery month, delivery location, etc. Investors need to understand these specifications in order to participate in trading.
5. Trading Mechanism: Futures trading generally involves margin trading, where investors only need to pay a small portion of the contract value as margin. This allows for leverage, which amplifies potential investment returns. However, it should be noted that leverage also magnifies risks.
6. Risk Management: Futures trading involves price fluctuations and potential risks. To manage risks, investors can employ various strategies like stop-loss orders, futures arbitrage, etc.
7. Delivery: If an investor holds a futures contract until the delivery date, the delivery will take place according to the contract terms. It can be physical delivery (for commodities) or cash settlement (for financial indices), depending on the specifics of the contract.
8. Price Influencing Factors: Futures prices are influenced by multiple factors, including supply and demand dynamics, market expectations, political and economic events, etc. Investors need to pay attention to these factors when making trading decisions.
Risk disclosure
It is important to note that futures trading involves high risks. Novice investors should thoroughly understand the market, risks, trading strategies, and seek professional advice to reduce risks and enhance the chances of investment success.
While futures trading can provide investment opportunities and hedging tools, it also carries certain risks, including the following:
1. Price Risk: The price of a futures contract is influenced by market supply and demand dynamics and expectations. If the market price experiences unfavorable changes, investors may incur losses. For example, if the futures price declines, the buyer may need to purchase the asset at a higher price than the market price.
2. Leverage Risk: Futures trading often involves leverage, meaning investors only need to pay a small portion of the contract value as margin to control a larger amount of assets. However, this also means that if the market moves unfavorably, investors may lose more than the initial margin paid. Therefore, futures trading carries a high leverage risk.
3. Liquidity Risk: The liquidity of the futures market can be affected by a decrease in market participants or drastic price fluctuations. When market liquidity is low, investors may have difficulty selling or buying futures contracts in a timely manner or may have to transact at unfavorable prices.
4. Policy Risk: Changes in government policies and regulatory measures can significantly affect the futures market. For example, altering interest rate policies, introducing new regulatory rules, or imposing restrictions on certain trading activities can have adverse effects on the futures market.
5. Unforeseen Risk: There are always unforeseen risks in the market, such as natural disasters, conflicts, or global events. These events can impact market supply and demand dynamics, and have adverse effects on futures trading.
Investors should assess their own risk tolerance and approach futures trading cautiously. It is advisable to establish sound risk management strategies, such as setting stop-loss and take-profit levels, diversifying investment portfolios, maintaining sufficient margin levels, and regularly reviewing and adjusting trading strategies. Additionally, it is recommended that investors fully understand the relevant rules, risks, and regulatory mechanisms of the futures market before engaging in futures trading.
For the basic knowledge and trading mechanism of Futures, please refer to the information provided by Investor and Financial Education Council. You should pay careful attention to the Liability Statement section on the homepage of the website of The IFEC at (www.ifec.org.hk) when referring to information using this link.
Futures
Futures are a type of financial derivative that allows investors to buy or sell specific assets at an agreed price on a future date.
Some basic knowledge about futures
1. Definition: Futures are standardized contracts traded on exchanges, specifying the delivery of a particular underlying asset (such as commodities, financial instruments, etc.) on a specific future date.
2. Underlying Assets: The underlying assets of futures contracts can be commodities (such as gold, crude oil, etc.), financial instruments (such as stock indices, bonds, etc.), or other assets.
3. Exchanges: Futures contracts are traded on specific exchanges, and investors can engage in trading through brokers or online platforms.
4. Contract Specifications: Each futures contract has specific contract specifications, including contract size, delivery month, delivery location, etc. Investors need to understand these specifications in order to participate in trading.
5. Trading Mechanism: Futures trading generally involves margin trading, where investors only need to pay a small portion of the contract value as margin. This allows for leverage, which amplifies potential investment returns. However, it should be noted that leverage also magnifies risks.
6. Risk Management: Futures trading involves price fluctuations and potential risks. To manage risks, investors can employ various strategies like stop-loss orders, futures arbitrage, etc.
7. Delivery: If an investor holds a futures contract until the delivery date, the delivery will take place according to the contract terms. It can be physical delivery (for commodities) or cash settlement (for financial indices), depending on the specifics of the contract.
8. Price Influencing Factors: Futures prices are influenced by multiple factors, including supply and demand dynamics, market expectations, political and economic events, etc. Investors need to pay attention to these factors when making trading decisions.
Risk disclosure
It is important to note that futures trading involves high risks. Novice investors should thoroughly understand the market, risks, trading strategies, and seek professional advice to reduce risks and enhance the chances of investment success.
While futures trading can provide investment opportunities and hedging tools, it also carries certain risks, including the following:
1. Price Risk: The price of a futures contract is influenced by market supply and demand dynamics and expectations. If the market price experiences unfavorable changes, investors may incur losses. For example, if the futures price declines, the buyer may need to purchase the asset at a higher price than the market price.
2. Leverage Risk: Futures trading often involves leverage, meaning investors only need to pay a small portion of the contract value as margin to control a larger amount of assets. However, this also means that if the market moves unfavorably, investors may lose more than the initial margin paid. Therefore, futures trading carries a high leverage risk.
3. Liquidity Risk: The liquidity of the futures market can be affected by a decrease in market participants or drastic price fluctuations. When market liquidity is low, investors may have difficulty selling or buying futures contracts in a timely manner or may have to transact at unfavorable prices.
4. Policy Risk: Changes in government policies and regulatory measures can significantly affect the futures market. For example, altering interest rate policies, introducing new regulatory rules, or imposing restrictions on certain trading activities can have adverse effects on the futures market.
5. Unforeseen Risk: There are always unforeseen risks in the market, such as natural disasters, conflicts, or global events. These events can impact market supply and demand dynamics, and have adverse effects on futures trading.
Investors should assess their own risk tolerance and approach futures trading cautiously. It is advisable to establish sound risk management strategies, such as setting stop-loss and take-profit levels, diversifying investment portfolios, maintaining sufficient margin levels, and regularly reviewing and adjusting trading strategies. Additionally, it is recommended that investors fully understand the relevant rules, risks, and regulatory mechanisms of the futures market before engaging in futures trading.
For the basic knowledge and trading mechanism of Futures, please refer to the information provided by Investor and Financial Education Council. You should pay careful attention to the Liability Statement section on the homepage of the website of The IFEC at (www.ifec.org.hk) when referring to information using this link.
