The advantages of Trading futures.
The lack of information or the wrong information that exists on operating in these markets typically causes most investors think that they only serve to cover blocks of shares, also because the brokers are more interested in their clients working in the shares market and charge them higher fees. All this means that many investors are unaware of the advantages associated with Future operations.
The lack of information or the wrong information that exists on operating in these markets typically causes most investors think that they only serve to cover blocks of shares, also because the brokers are more interested in their clients working in the shares market and charge them higher fees. All this means that many investors are unaware of the advantages associated with Future operations.
A futures contract is a standardized contract to buy or sell a specified commodity at a certain date in the future and at a market-determined price (the futures price).
The futures contract will state the price that will be paid and the date of delivery. But don't worry, almost all futures contracts end without the actual physical delivery of the commodity. So, a futures contract is an agreement between two parties: a short position - the party who agrees to deliver a commodity - and a long position - the party who agrees to receive a commodity.
- To operate on the future of the Ibex 35, a deposit is required, like a guarantee to the broker through which we will operate. These warranties depends of the broker (can range between € 5000 and € 12000). With that deposit we can operate on the total nominal value. The nominal value of the future of Ibex is calculated by multiplying by 10, the points of the future, where 1 point has a value of 10€.
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For example for a future price of 10.000 points, the nominal value would be € 100,000.
- Depending on the broker you choose, you will be charged more or less commission, depending on the number of operations you do per month/year, usually between 6 € to 20€ . So for a nominal value of €100,000 we would be talking of an average of 0,010% of commission. The fees for a stake of 100,000€ of shares will be between 0.10% and 0.15%, you would pay between 100 € and 135 €. As you can see the difference is huge.
Operate either for the price to increase or decrease: One of the biggest advantages is that we can operate either upward or downward.
For example: If we buy at the price of 9000 and we sell that contract at 9050, we have earned 50 points multiplied by 10 € = 500 €. We can also enter the market by selling a contract for 9000 and get out buying at 8950 contract, we have earned 50 points multiplied by 10 € = 500 €.
Operate either for the price to increase or decrease: One of the biggest advantages is that we can operate either upward or downward.
For example: If we buy at the price of 9000 and we sell that contract at 9050, we have earned 50 points multiplied by 10 € = 500 €. We can also enter the market by selling a contract for 9000 and get out buying at 8950 contract, we have earned 50 points multiplied by 10 € = 500 €.
You can sell high and buy low or
You can buy low and sell high or
You can buy low and sell high or
If I buy at 100, I will win if the price goes up.
· If the price goes up to 110, I sell and take a profit of 10 €
· If the price goes down to 90, I sell and lose 10€.
If I sell at 100, I will win if the price goes down.
· If the price goes down to 90, I buy it and make a profit of 10 €
· If the price goes up to 110, I buy it and lose 10€.
Xavier Sierra
Financial Technical Analyst, Trading Systems Developer and Private Trader
