What is the origin of futures? Is it really that magical? Today, let's get to know it from the surface. First, understand the origin of the futures market.

The history of the futures market can be traced back to the Middle Ages. It was to meet the needs of farmers and merchants. Suppose the situation of a farmer in May of a certain year, he anticipates that the price of grain harvested in September will be uncertain. If the supply is less than the demand at that time, the price of grain may rise very high--especially when farmers are not in a hurry to sell grain, it is evident that the farmer and his family are facing a great risk of price uncertainty. Next, let's assume there is a merchant with a long-term demand for grain, and he is also facing a great price risk. In the case of supply exceeding demand, the price will be very favorable to him. However, when the supply is less than the demand, the price could rise too high. In this way, for both farmers and merchants, it makes sense to meet in September (or earlier) and agree on a unified price based on both parties' expectations of the supply and demand of grain in September. In other words, they can negotiate to establish some type of futures contract, which can eliminate the risks faced by both parties due to future price uncertainty. Futures trading evolved from the forward market in spot trading. Modern futures trading originated in the mid-19th century in the Midwest of the United States. In 1848, 82 merchants in Chicago initiated the establishment of the Chicago Board of Trade (CBOT). They conducted transactions using forward contracts, and by 1865, they introduced standardized contracts. At the same time, a margin system was implemented, charging both parties a margin of no more than 10% of the contract value as a guarantee of performance. These historically significant institutional innovations led to the birth of true futures trading. Soon, speculators became interested in these contracts. They found that the trading of contracts in trading activities was more attractive than the trading of grain itself. Since then, both spot merchants and speculators who are optimistic about the futures market have flocked to the market, promoting the development of futures around the world.

What attributes must a commodity have to be listed as a futures contract?

1. Significant price fluctuations;

2. Large supply and demand volume;

3. Easy to grade and standardize;

4. Easy to store and transport. What are the types of futures? The main varieties of commodity futures can be divided into agricultural futures, metal futures (including base metals and precious metals futures), and energy futures; the main varieties of financial futures can be divided into foreign exchange futures, interest rate futures (including long-term and short-term bond futures), and stock index futures.

Advertisement

Introduction to common futures varieties:

1. Shanghai Futures Exchange

Varieties include: Copper, Aluminum, Zinc, Lead, Pulp, Rubber, Gold, Fuel Oil, Rebar, Wire, Silver, Asphalt, Asphalt 1906 flat today, Hot Rolled Coil, Tin, Nickel.2. Dalian Commodity Exchange

Commodity varieties include: Soybean No. 1, Soybean No. 2, Soybean Meal, Soybean Oil, Corn, Corn Starch, Polyethylene, Palm Oil, Polyvinyl Chloride, Coke, Coke Current, Coking Coal, Coking Coal Current, Iron Ore, Eggs, Fiberboard, Plywood, Polypropylene, Ethylene Glycol.

3. Zhengzhou Commodity Exchange

Commodity varieties include: Strong Wheat, Common Wheat, Cotton, Cotton Yarn, Apple, White Sugar, PTA, Rapeseed Oil, Rapeseed, Glass, Power Coal, Methanol, Ferrosilicon, Manganese Silicide, etc.

4. China Financial Futures Exchange

Commodity varieties include: CSI 300, SSE 50, CSI 500, 2-year Treasury Bonds, 5-year Treasury Bonds, 10-year Treasury Bonds.

5. Futures varieties listed on the Shanghai International Energy Exchange include: Energy and Chemicals, Crude Oil, Low Sulfur Fuel Oil, Rubber 20, Non-ferrous Metals, Copper.

Currently, there are five futures trading markets in our country, each with different tradable varieties. What are the basic systems that need to be followed when trading futures? Position Limit System, Large Trader Reporting System, Physical Delivery System, Margin System, Daily Settlement System, Price Limit System, Forced Liquidation System, Risk Reserve Fund, and Information Disclosure System. It is known that futures have investment risks, what are the risks? Leverage Risk, Forced Liquidation and Bankruptcy Risk, Delivery Risk. What are the trading characteristics of futures? Two-way nature, low cost, leverage effect, T+0. Futures are a double-edged sword; its characteristics allow for the potential of huge profits in a short time, but also come with significant investment risks. Investment should be approached with caution. That's all for today.