Learn Investing Secrets

From Agricultural Products To Financial Instruments

The origins of the modern futures market lies in the agriculture markets of the 19th century. It is a worldwide market for all sorts of commodities, including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds.

When the futures market is played by speculators, the actual goods are not important because there is no expectation of delivery. The futures contract specifies a buying price, a quantity and a delivery date.

Speculators hope to profit by the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise, or by buying short (from the seller) if they expect prices to fall.

From provincial Products To Financial Instruments

The origins of the modern futures market lies in the fertility god markets of the 19th century. Farmers started selling contracts to deliver country products at a later date. This was done to threaten market needs and stabilize supply and demand during off seasons.

The current futures market has moved far therewith agrarian products. It is a worldwide market for all sorts of commodities, including manufactured goods, farm products, and financial instruments such as currencies and treasury bonds.

When the futures market is played by speculators, the validated goods are not important being there is no expectation of delivery. Rather, it is the contract itself that is traded, the value of which changes constantly throughout the day as expectations mutate regarding the value of the special itself.

Win Or Lose

In every futures contract there is a patron and a seller. The seller takes the short position and the patron takes the long position. The futures contract specifies a price, a quantity and a delivery date.

Speculators hope to profit by the daily fluctuations in the futures market by long (from the buyer) if they expect prices to rise, or by sale short (from the seller) if they expect prices to fall. Futures memoir are settled every day.

At the end of the contract period, the contract itself is settled. The final contract patron can now take delivery of his truckload of whatevers. Of course, he may opt to just start the process all over above by writing up a contract to deliver his whatevers on a believing date at a agape price.

FOREX Benefits

The foreign exchange market (FOREX) has several advantages over the futures market.

More Liquid. FOREX is an extremely liquid market. As the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that FOREX stop orders can be executed more easily and with less slippage. The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes FOREX more liquid and allows FOREX traders to take domination of trading opportunities as they sweep up rather than waiting for the market to open.

Commission-Free. FOREX transactions have no commissions. Brokers earn money by setting a spread -- the difference mid what a currency can be store at and what it can be sold at. In contrast, traders must pay a effectuation or boiler room fee for each futures transaction they enter into.

Instant Transactions. whereas of the high volume of trading, FOREX transactions are executed near instantly. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade -- not necessarily the price of your transaction.

Safeguards. Final prices in futures are hourly a little uncertain whereas of market gap and slippage. The FOREX is less risky being as how of built-in safeguards in the trading system.

Warren Buffett just did a video interview with Reuters. 

Here's what he said about Microsoft (MSFT): 

Reuters: You’re always looking for value. What about Microsoft? I know you say you don’t do tech. But given that it has a forward P/E right now that’s below 10, it seems like a value play.

Buffett: Yeah. I agree with you. I regard myself as precluded from either personally or having Berkshire buy Microsoft because if something good happened the following week people would think Bill had told me. So I just see no way that we can ever buy Microsoft and be sure that we won’t look like we had some kind of inside information or something. So it’s off limits. It did look pretty cheap.

Talk to Geoff About Microsoft

More Articles: