Understanding Two Types Of Futures

Futures are a good option for hedging and speculation purposes. With a futures contract, the buyer and seller enter into an agreement with an agreed-upon price and date of expiration. Once the date of expiration has passed, the buyer has to trade at the price that has been previously agreed upon, even if the market price has changed drastically. In this article, we share with you about the two main types of futures you can trade in.

Financial Futures

As a beginner futures trader, you will typically start out with trading financial futures. If you have some knowledge of trading stocks, you will already have a basic understanding of the factors that drive the price of financial futures. These include stock index prices and current market prices. Futures have their own trading markets separate from stocks, and they are accessible 23 hours a day on weekdays. Some examples of financial futures include foreign currencies and treasury bills.

When trading in the futures market, you have the option of putting down a margin of the value of your contract. This is used as collateral and the remaining amount is essentially “on loan” to you from your broker. Trading financial futures is lucrative for locking in prices for a future date, ensuring that you do not have to pay more even if the price increases.

Physical Futures

Physical futures are tied to commodities such as metals and energy products. These futures are typically traded by more experienced traders as unlike financial futures, the price can be affected by unpredictable factors such as weather, labor demands, transportation needs, natural disasters, and more. Although you can gain a higher profit from successfully trading physical futures, the unpredictability of the market also means that a high level of risk is involved.

Energy futures include natural energy, electricity, and oil that tend to be in high demand. When you enter into a futures contract involving one of these products, you are locking in the price for it at some point in the future. This makes energy futures a popular option for businesses that operate on a large scale and are trying to regulate their energy costs.

Turn to Bold Analysis, LLC, for A Wide Range of Futures Trading Resources

As a futures trader, you will require support and resources to inform your trading decisions. At Bold Analysis, LLC, we can provide you with just that. Whether 1-on-1 coaching or digital mentorship will suit your needs better, you can find the products and services to benefit you in our wide range of offerings. By equipping one trader at a time with the knowledge they require to take on the futures trading market, we hope to develop a strong, fierce, and independent trading community. You are welcome to contact us if you would like to get started with any of our products or services or require more information about what we have to offer.