Info 1: future trade definition
Info 2: how future trade works
Info 3: future trade vs option trade
Info 4: example of future trade
Opening information:
future trade breaks into two words future and trade, future means the coming period, and trade means buying and selling. Future trade means buying and selling the item nonpast time.
So now let’s have a look at what is future trade, how future trade works in the public market among all Corporate Industries, and what is the difference between future trade and option trade, finally one brief example of future trade.
Info 1: future trade definition
Mr. Jackino is a china man who trades any gold from any outside dealer for his work.
However, his trade is completely based on the future period.
When he had a deal with an outside gold provider, jackino created and agreed to a contract to purchase a certain amount of gold at a pre-determined price at a future date.
When the date is reached jackino automatically must purchase the gold at the agreed price, while purchasing the gold if the price is lower or higher than the agreed price, jackino must only chance to purchase the security at the determined price.
This might lead to loss sometimes for the jackino or it might also lead to strong profits, all because of the prediction of a contract agreement to trade the gold at a future date at the agreed amount now and purchase that in the future.
Here the trade activities done by the jackino for the gold to purchase them at a decided future date is what is named as a future trade.
So now let’s dive into how the future trade works in the public market among the public Industries.
Info 2: how future trade works
Future trades don’t represent any of the things or objects, instead, it’s a contracts that are used to buy and sell real securities in the future times period.
Therefore any of the persons who are willing to trade the real stock or debt instruments using the agreement deal among the other person in the future time, which that trade are considered as future trade.
Suppose the contract is not used to trade real securities or in the future period that trade is not demonstrated as a future trade.
The contract is not anything that happening between the two physical people, it’s an agreement to buy certain security at a pre-determined price at a determined time frame.
Then acting based on what the contract states, if the investor purchases a certain security at a decided market price, then no matter what certain security price would be high or low or equal to the agreed amount.
However the purchase of the underlying security of the specific stock or debt instruments would be obligated to be bought by the agreed Investors at the deal once the deal date is reached, that’s why it’s called a future trade.
Moreover, this contract would be used more complexly to trade any type of valued securities in the future time of the public market.
If someone trades the commodities of gold using the same contract that trade is what elaborates as a commodities futures trade.
Then forex currencies which are traded with a contract of future time agreement to purchase the money, which are came in the category of future trade.
On the other hand, simply individual stock would be used to trade with future contracts which are illustrated as a stock future trade.
Most people are confused about future trade and option trade, so let’s jump into the key differences anyway.
Info 3: future trade vs option trade
The difference between future trade and option trade is, that that option trade is the one that shows the agreement with no choice to not purchase and gamble the price fluctuation of one original security.
On the other side, options trade is the one which refers to the deals of agreed contracts with the choice to purchase or not purchase the items on future dates.
To make you more clear about the future trade, let’s look into one brief example below.
Info 4: example of future trade
Say the company H offered the 13 million common shares, where they also planned to release the new share within 2 months. However, most traders are willing to purchase such shares at a very low price, and some of them need them at a fair price.
However the market price of company H is more than a fair price, so the majority of the short-term traders use the contract of derivatives to purchase the stock H in future times.
On the other, someone uses a contract agreement with choice to speculate on the up and fall of price in stock H securities.
Here the agreement with choice is option trade and the contract with future purchases is what is ed free trade.