Futures & CFDs

Ever thought you earn at the expense of the future? A futures is a contract between the parties that obliges you to sell an agreed underlying asset at a specific time and at a certain price. The profit or loss of a futures trader depends, similarly to a CFD, on the price movement of the underlying asset (cryptocurrency, stock, commodity, etc.).

A futures is a contract between the parties that obliges you to sell an agreed underlying asset at a specific time and at a certain price. The profit or loss of a futures trader depends, similarly to a CFD, on the price movement of the underlying asset (cryptocurrency, stock, commodity, etc.). For example, you buy 5 stock futures with an expiry date of December 1, then agree to sell them for 10 euros/piece. If the share price is 14 euros by the first of December, the profit will be 4 times 5, or 20 euros. If the price is less than 10 euros, you have made a loss. Such a calculation is characteristic of a long position, that is, predicting an increase in the value of the underlying asset, when taking a short position, profits and losses are incurred, on the contrary, since the buyer bets on a decrease in the price of the underlying asset.

Futures features

Expiration

If, for example, when trading stocks, you choose for yourself when you close your position, then in the case of futures, the date is fixed.

Leverage

When buying a future, you do not have to pay the entire value of the contract, usually the collateral is only 2-10% (the exact percentage of collateral is determined by the broker) of the contract value so that there is enough assets on the client's account to pay off possible losses. This allows you to earn higher profits and spread your money among more financial instruments.

Futures Trading

Futures trading is very risky, as the possible gains and losses are not limited. Therefore, futures are suitable for a trader who has familiarized himself well with the matter. A trader who has completed our training has a decent foundation of knowledge on which to start building practical experience. Since theory alone is not enough, we recommend that you also play through transactions "on paper" before investing real money in futures in order to gain practical experience.

If you want to know more about futures, contact us or register for a trading course.

CFDs

Assets365 is the perfect CFD broker for experienced traders. With our contract for differences, you can easily exchange the difference in the value of a financial product between the time the contract opens and closes. You can maximize your profits and minimize your risks with Assets365!

A CFD (contract for difference) or contract for difference allows you to trade financial instruments (stocks, index funds, mineral resources, etc.) without owning the instrument yourself. The transaction takes place between the buyer and the broker who owns the desired instrument. When closing a position, the buyer must pay the broker the difference between the price at the time of the conclusion of the contract and the closing price. If the difference is positive, the broker pays the buyer, if negative, then the buyer to the broker.

CFDs are leveraged products as they require only a small deposit (margin) to enter the market. This allows you to start trading with smaller initial capital and better diversify your portfolio.

How does leverage work?

Since when trading a CFD, you do not own the underlying asset, but speculate on the price of the instrument, you do not have to cash out the entire volume of the transaction. For example, if you want to buy 100 shares with a price of 25 euros per piece, you should pay 2500 euros, but if you buy 100 CFDs, which is equal to 100 shares, and the broker offers a guarantee percentage of 30%, then you should pay only 750 euros to open an equivalent position on the market. This means that you will have more than 1750 euros left over, which you can place in other instruments. Leverage is a double-edged sword and is suitable for an experienced and knowledgeable trader, as both wins and losses are higher. For example, if the share you bought increased from 25 euros to 26 euros, you have earned 100 euros, i.e. increased your investment by 4%. However, if you decided on a CFD, you have still earned 100 euros, but since you paid only 750 euros, you have increased your investment by 13.3%. However, the loss caused by the unfavorable movement of the underlying asset is also higher when trading with a CFD – if the price dropped from 25 euros to 24 euros, then in both cases you have lost 100 euros, but if the percentage of loss when trading CFD is -13.3%, then when entering the market at full value of the transaction is only -4%.

The lower the percentage of collateral, the higher the risk.

So, before trading CFDs, it is worthwhile to properly understand the mechanisms of operation of the market for yourself.

Short vs. Long Position

In short, taking a short position, or selling it short, means predicting the fall in the value of an instrument, while a long position means predicting an increase. For example, short selling of shares works like this: the buyer borrows 10 shares worth 5 euros and immediately sells them. If the value has dropped to 4 euros, he buys them back and returns 10 shares, earning 10 euros. However, short selling of shares has its drawbacks.

For example, it may happen that no one wants to lend you a stock that you would like to short-sell. This is where CFDs come into play, which are much easier to sell short. By entering into a contract for difference, you open a short selling position, which, on the contrary, generates a profit when the price of the underlying asset falls. The possibility of short selling opens up a new territory for traders in the market, which also allows you to earn from the fall of the instrument. However, short selling also comes with its own risks, the biggest of which is the chance of losing more than the initial investment. For example, if you buy 10 CFDs with a 100% guarantee (to make it easier to follow the math) with a value of €30, you will invest a total of €300. If the price suddenly rises to 300 euros and you decide to give up your position, you have lost 2700 euros (3000-300).

o sum up: trading and short selling CFDs involves high risks, but the higher the potential winnings. In order to use CFDs to your advantage, you need to familiarize yourself with the markets and their analysis.