What are futures?

Futures are a financial derivative known as Forward Contract . The Futures contract undertakes the Seller to provide the Buyer with a commodity or other asset to the agreed date. They are generally traded for commodities such as sugar, coffee, oil and wheat, as well as financial instruments such as stock market indices, government bonds and foreign currency. Thales believed that the upcoming olive olive harvest would be particularly rich, concluded agreements with the owners of all olive oil presses in the region. In exchange for the small deposit months before harvest, Thales received the right to rent presses at market prices during the harvest. As it turned out, Thales had the right harvest, the demand for oil foxes lit up and earned a lot of money.

Until the 12th century, futures contracts became the foundation of European trade fairs. At that time, traveling with a large number of goods was time -consuming and dangerous. Righteous sellers instead traveled with display samples and sold futures for larger quantities that havebe delivered later. In the 17th century, these contracts were so common that extensive speculation was managed by the Dutch tulip mania, in which prices for tulip bulbs became exaggerated. Most of the money changing their hands during mania was actually for futures for tulips, not for the tulips themselves. In Japan, the first recorded futures rice dates from the 17th century Osaka. These offered rice sellers some protection against bad weather or war. In the United States, the Chicago Board of Trade opened the first futures market in 1868 with wheat contracts, pork belly and copper.

At the beginning of the 1970s. The 20th century exploded trading with futures and other derivatives. Fischer Black and Myron Scholes have allowed investors and speculators to quickly appreciate futures and possibilities. To provide demand for new types, the main exchanges have expanded or opened all over the world, mainly in Chicago, New York and London.

exchanges play an essential role in trading with fUtures. Each contract is characterized by a number of factors, including the nature of the underlying asset, when it must be delivered, a currency of transactions at which the contract stops trading and the size of ticks or minimal legal change in the price. By standardizing these factors in a variety of futures contracts, large, predictable market exchanges create.

futures trading is not without significant risk. Because these contracts generally include a high level of leverage, they were the core of many market blowing. Nick Leeson and Barings Bank, Enron and Metallgesell Shaft are just a few of the infamous names associated with the futures-drifinant disaster out. The most famous of all may be long -term capital management (LTCM); Despite the fact that Fischer Black and Myron Scholes on his payout, both Nobel Laureates, LTCM laureates managed to lose so fast that the Federal Reserve Bank of the United States was forced to intervene and organize rescue to prevent the entire financial system.

In the United States, these transactions are regulated by the commission for commodity futures.