The truth about the currency futures contract (2)

Yesterday I shared with you the basic concept of futures contracts.This investment method of futures contracts was first born in the field of commodity trading, and is used by commodity producers as a tool to avoid risks.

What does it mean? Let's look at a concrete example:

For example, farmers who grow rice sell rice at 3 yuan per catty this year, which is a good price, but will they still be able to sell rice at this price next year? Will rice prices fall due to market changes next year? Therefore, in order to ensure that they can sell rice at this price next year, farmers can lock in the price of 3 yuan a catty to sell rice in the futures market. Of course, in order to lock in this transaction, farmers have to pay a certain handling fee.

If the price of rice falls below 3 yuan next year, farmers don't have to worry, they can still sell rice at 3 yuan a catty according to the provisions of the futures contract.

In futures trading, the price of futures is constantly changing with market conditions. Therefore, in many cases, before the futures expire, both parties to the futures transaction will settle the transaction in advance for various reasons, without waiting until the delivery date. , a real physical delivery takes place.

This situation quickly attracted the attention of speculators --- since many futures transactions will not have real physical delivery, it is better to simply treat futures transactions as a means of speculation, without paying attention to the specific trading products of futures transactions. What.

Therefore, the development of futures trading has actually become a flexible way of speculation. In futures trading, a large number of transactions will not actually be delivered at all.

Having said that, we must also mention another concept relative to futures trading: "spot trading".

Spot trading is what we usually call the transaction method of paying with one hand and delivering with the other hand. We usually buy and sell stocks, and buy and sell commodities are all spot transactions.

In modern finance, almost any field with spot transactions has futures transactions, and the digital currency field is no exception. The birth of digital currency trading is not long, but after the birth of digital currency trading, futures trading in this field has developed rapidly.

As early as the beginning of the rise of digital currency trading, some digital currency trading platforms have launched futures contracts based on Bitcoin. In the early days, there were four bitcoin contract futures with different maturities launched by Crypto Facilities, a British digital currency exchange. In 2014, BitMEX, a well-known digital currency futures exchange in the United States, was established. BitMEX also provides financing leverage services while setting up futures transactions. The leverage it provides can be arbitrarily selected from 1.01 to 100 times.

In my country, futures contracts on digital currency trading platforms have also emerged since 2014, and now mainstream digital currency exchanges have basically launched their own futures contract transactions.

Everything has two sides, and the same is true for futures contracts. It can be used as a good tool to guarantee transaction prices, and it can also be used as a tool for speculative transactions.

For long-term investors, especially those who hoard coins, it allows them to continue hoarding coins at a good price; but for friends who are obsessed with speculation, it is a double-edged sword, and the scene of the currency circle The joys and sorrows come from this.

As a conservative hoarder, I suggest that you still use futures contracts as a way to lock in low prices to hoard coins.

For example, on March 12 this year, the price of Bitcoin plummeted. For long-term fixed investors, the lower the price, the better the opportunity to buy. The more chips the investor can buy.

Therefore, on the day of the sharp drop, long-term fixed investors can buy a quarterly contract at the right time and lock it for 3 months to buy Bitcoin at the price that plummeted at that time, and then they can lock it for a quarter and continue to buy at a low price. Now that the price of Bitcoin is close to 10,000 US dollars, if you can buy Bitcoin hoarding coins at the time when it plummeted to more than 4,000 US dollars, the profit will be considerable.

Of course, most investors who conduct contract transactions in the currency circle prefer to operate it as a speculative method. But this method of operation has a lot of pitfalls and pitfalls.

In the next article, I will continue to share with you the pits and traps in futures contract trading.