What are futures? - MoneyWeek Investment Tutorials

What are futures? Tim Bennett explains the key features and basic principles of futures, which, alongside swaps, options and covered warrants, make up the derivatives market.
Related links…
- What are derivatives? • What are derivatives? ...
- What are options and covered warrants? • What are options and c...
- What are futures? • What are futures? - Mo...
- What is a swap? • What is a swap? - Mone...
- Why you should avoid structured products • Why you should avoid s...
MoneyWeek videos are designed to help you become a better investor, and to give you a better understanding of the markets. They’re aimed at both beginners and more experienced investors.
In all our videos we explain things in an easy-to-understand way. Some videos are about important ideas and concepts. Others are about investment stories and themes in the news. The emphasis is on clarity and brevity. We don’t want to waste your time with a 20-minute video that could easily be so much shorter.
We’ve already made over 200 financial videos and we add more each week. You can see the full archive here at MoneyWeek videos.

[@soumya508]

This guy has delivered in 20 minutes what took me 1 month to understand as an Optional Paper in my MBA Finance degree. Really well articulated and comprehended for a general audience!!

[@metalichasan]

Forwards and futures can't be explained any more simply in such a short time. Thanks a ton for the video.

[@jbullionaire2749]

A ton of aluminium? $2500 for you my friend

[@coolkidbmx6851]

If this is simple then I don't know..i'm so lost. Why would anyone want to transact like this? Feels like A WHOLE LOT of pissing into the wind by all parties...

[@Jobrave]

Really? I did not think that this was that great a job. Eg. Why choose "producer" and "manufacturer" when "buyer" and "seller" could suffice? Produce and manufacture are quite synonymous, and now you have to remember - who is buying who is selling?

[@xXalaXx7]

God bless this guy.

[@felipepwns]

Can we start a donation page for this man...

[@kgantshomonaledi6235]

Literally

[@1GearG0]

Yup

[@atdb209Ye]

I feel that I owe him tuition... he deserves it.

[@chobelawan927]

I don't think there is a limit to the potential profits in the market and it all depends on your capital. I trade FX with SQB_AMAC which is the best strategy ever developed and I started with a $ 5,000 account and was able to raise more than $ 380,000 in 6 months. Just get the SQB-AMAC strategy and good capital and the stars could be yours.

[@rodneyebert]

Great video. One important thing when it comes to crypto is to trade and not hope on price rising and falling

[@jacksonrodrigez4310]

Crypto is the future, investing in it now will be the wisest thing to do especially if you are been guided by a professional. I believe the benefits of a successful trade comes from an expert.

[@jacksonrodrigez4310]

That is why i made huge profit with the help of Mr Sean Travis Anthony, he's a genius and that's why i always advice novice to trade with him.

[@nicolaspedro644]

Started my trade in Crypto as a newbie, with Zero knowledge of what i am doing but meeting Sean Travis Anthony has been Amazing and a blessing to me

[@briansteven636]

@@jacksonrodrigez4310 There is an opportunity for newbies and some old holders to capitalize on. it"s quite a shame people can't see this. Trading is everything right now

[@user-rq4od4jb1m]

I've stopped worrying about the fall in the price of Bitcoin since I began using Sean strategy, and I've made gains every day even when the price is down.

[@MoneyWeekVideos]

Remember that the moment you sign a futures contract to buy or sell an asset at a particular price you are locked in to those terms no matter what the market price then does. The only way out of a contract as the buyer is to close your position and make the relevant payment to the seller. The advantage if a futures contract is price certainty but this is also its drawback if you can buy cheaper later on the open market. Tim.

[@giannispets]

One of my question is how futures are connected with the producer of the real underlying asset... lets say someone shorts the market and drives the price down a miner for example might not willing to sell at this price because at this price he might be unprofitable

[@TkankaFotowoltaiczna]

@@giannispets did you find the answer? I like how in the video was mentioned many times that this is pure gambling. But does this gambling impacting real market prices? If yes - well, in my opinion we have a problem.

[@dragonchr15]

@@giannispets that's the point of a futures contract...it is an OBLIGATION to buy or sell. The miner has no choice but to sell his products to the bearer of the contract for the agreed upon price. The miner can be sued for not executing an agreed upon contract by two parties. Another possibility is if the party that the miner entered into the contract with, maybe an energy company, sells the futures contract to a trader via a broker, the trader, who probably has no use for the miner's products (let's say coal), will just accept a cash payout from the miner for the difference. ie, if the contract was to sell 100 lumps of coal for $10 (made up commodity, lol), then the miner has to provide the 100 lumps of coal for $10 ($1,000 total) to the energy company. If the coal was trading for $15 a lump on the open market, the energy company wins and the coal miner loses. If the price of coal plummets to $5, maybe due to political issues, the energy company may buy the coal for $5 on the open market, and when the time comes to settle the contract with the miner, it might pay $500 cash to the miner ($1,000 (contract) - $500 (market)). On the flip side, if the price of coal rises to $15 because of opposite political issues, the miner might just sell his 100 lumps of coal on the open market and pay the energy company $500 ($1,500 (market) - $1,000 (contract)) to reimburse them for the extra they had to pay.

[@cristianmitran8620]

This is one of the most comprehensable financial videos out on the internet. I absolutely adore it. Very simplified explanation. Thank you very much!

[@SathienDaerka]

If I pass my Masters in Finance, I'm dedicating it to this guy.

[@samuelspencer5047]

How is your progress in your masters or has that been halted because of covid. Please look into a channel by a finance professor/asset manager called Patrick Boyle. You will learn a lot from his channel. It is corporate finance he discusses and in great detail.

[@Shahsa001]

I tried trading myself and lost over 500 in a night, this prompted me to get an expert sir Arlo Eric to handle it for a commission charge and I have been performing excellently well with good profits ratio weekly, quite an experience for me

[@Thyago2420]

Can you link me to Mr Eric, I will like to recover my losses and make profits

[@Shahsa001]

Arloeric1 @

[@Shahsa001]

That’s his G mail above okay

[@Thyago2420]

Thank you for your response, I just mailed him and we have gotten talking

[@Arief351]

I will also take advantage of this opportunity, thank you very much

[@NateHeroic]

The only content I have found that actually explains futures.

[@HenryEnglander]

Love your videos, Tim. I've nearly watched them all! Especially liked this one where I suddenly got a 'Eureka' moment about how futures (and derivatives) work. Thank you and keep them coming!

[@underoath257]

This is what I call a high quality education

[@Peter-st6cv]

The way you breakdown material is amazing. Thanks for breaking it down

[@datchodidaopho]

I took a Finance class and your video helps me understand the Future contract much better. Thank you, great tutorial

[@amberyang3489]

This video is amazing! I can't follow my teacher since we start tallying derivatives, but now it's much clear to me.

[@neuverschuldung]

the way you explain the futures market gives the impression that it is just a big casino for speculators

[@keithcheokkeyang]

+Alexander Hecking Derivatives mkts are rather short term, since its pretty hard to predict short term price changes. its pretty much gambling.

[@rezivillehulgado2497]

Winner of a video, I've been looking for "sideways forex trends forecast" for a while now, and I think this has helped. You ever tried - Piyatthew Forexify Trends - (just google it ) ? Ive heard some awesome things about it and my buddy got excellent results with it.

[@luisdiegocr]

yes, and the casino here is the future exchange, no matter what happen, he/she gets his/her commission

[@pennycarlson1943]

As far as risk goes, speculating in futures is akin to gambling. however; futures markets also provide a way for those involved in production of commodities to lock in a price (hedge). The big difference between speculation and gambling is that gambling creates risk. With speculation, the risk of price changes already exists. Futures markets are a way for the risk to be transferred from the hedger, who wants to lock in a price so that they can intelligently plan for production, to the speculator, who wants to accept the risk and hopes to profit from accepting that risk.

[@ThePorschefan]

Is not gambbling, the market reacts to simple supply, demand and scarcity and base on probabilities and statistics you say "There's gonna be chicken scarcity so prices may go up, i should buy chicken futures contracts to fix a price before it goes up and so if prices rise, i would have my chicken at a lower fixed price not afected by current inflation" Its hedging against risk, not gambbling

[@MichaelGotiashvili]

#1 advantage of these videos is that the host is not some Indus guy with a terrible pronunciation and it's a pleasure to listen to him!

[@NicholasFainlight]

I'm currently a student a long way from investing in futures myself, but I found this video to be very insightful. Thanks!

[@arieftaufan8566]

No one in my class explained like him, thanks man for sharing

[@hamzatamne2983]

Perfect way of conveying about Derivatives...very helpful...God Bless You

[@neil5611]

For starters, this info is gold. So many light bulbs turned on in my head throughout the lesson. This video is phenomenal. I almost gave up on futures until this video. Thank you.

[@emphase6]

Watched many videos and read articles trying to understand this futures, This video made it click, thank you for that. Brilliant.

[@erycklelann1907]

This is by Far the clearest Future explication i've ever Seen. Thanks you a lot

[@salmandeveloper]

Good work Tim, "It is not just the head, the whole beast comes with it" lol...

[@marcosibuki7464]

In the entire internet, this is the single only one BEST EXPLANATION 👏🏼👏🏼👏🏼👏🏼👏🏼👏🏼👏🏼👏🏼👏🏼

[@shielajoynebato4191]

Thank you for this, Sir. I finally understand this matter more clear than my 4 years of studying.

[@leeshaoloung7302]

The best explanation free available for anyone on how futures work.

[@marmanlive]

Brilliantly and smoothly explained... thanks a lot!

[@hagingimm247]

if u need real trader life. find "s7futures" on youtube

[@luiscanamarvega]

This is absolutely fantastic. Thank you!

[@BoxLaneProductions]

Why has this been recommended all year non stop

[@uksoontobeinaus706]

You're so awesome Tim, thank you so much for teaching

[@glpify]

God bless you Tim, amazingly helpful for people wanting to get into this industry

[@INvestYOU]

awesome explanation thanks a lot

[@DanielPeraalta]

You just answered every and each of my doubts about that matter. What couldn’t be solved by other few videos! thank you so much!

[@richashankar7732]

This is my favourite KZbin series :)

[@reddiamondxiv]

I love his explanation. Very detailed and has visuals.

[@reddiamondxiv]

Makes it simple and easy to absorb. Wish their were more recent videos. 👍🏽

[@coffeeforlife4104]

Thank you Mr Tim, you explain the concept better than my lecturer :)

[@dzx3934]

Thank you so much! You succinctly explained in 20 mins what my lecture notes takes hours of reading to understand..

[@zhubarb]

Tim, thank you. You are a gifted teacher.

[@EmilyAngela412]

I finally get it! thank you for your videos.

[@johnholme783]

Both comprehensive and simple to understand. Well done!

[@clarencelee4911]

Best explanation I can find on the internet for futures

[@larryporter3744]

You primarily carry on making enlightening videos. You can keep them coming back!

[@Bryce25400]

Thank you so much for this tutorial, this was much simpler and way easy to understand

[@IPSINGHSANDHUU]

Thanks for your help. It's really helpful

[@joannamrozek9884]

Great videos. Love the way you explain compkex financial concepts with real life examples.

[@sagarsingh1234]

Amazing video!!! Very clear explanation. You are a very good teacher! Keep up the good work Tim!!!

[@datchodidaopho]

Very helpful video, thank you so much. I have been trying to look for a detail explanation for so long

[@superman0391]

i didnt even bother to listen to my confusing lecturer's 2 hour lecture and came straight here, got it in 10mins. thanks

[@anirudhb8927]

Beautifully explained!..kudos!

[@manibabai2115]

Perfect explanation with a very interesting Example at the end ! thank you so much !

[@virutronresearch5845]

While others try to impress us with financial gobbledygook, you nail it with easy to understand example. Thank you very much, Sir!

[@mikhailtagallie8274]

thank you very much. I never really understood futures until this video.

[@nihalvlog7606]

The examples which you share are just great and simple to understand

[@thepassionatesoul1802]

I hope you were my tutor! it's amazing how I understand your explanation so easy!

[@drukpakunley5659]

Zainab Naser I feel the same way

[@DanielPeraalta]

me too!

[@gianlucascacco6954]

Really well done, I am an MBA student and I enjoyed watch this video.

[@bojandimitrijevic6659]

Very good. Bright explanation!

[@eaglenavaneeth]

Thanks Man, finally understood Futures Market . Very helpful

[@JanKnettig]

Nicely explained. Finally starting to understand it.

[@melvinleong3731]

dude.. i really was struggling to watch this.. i hung in there and relised that your amazing .. thanks for sharing your brain.

[@warren2398]

I must admit, i have watch like 2 videos before this so I may have already been getting it. But most of my questions during the video HE ANSWERED. This was pretty damn thorough.

[@Dayta]

so this is 2021 now and after watching alot of videos this was the first one where i thought ... nice finaly someone who is actualy explaining it .. great work ! thanks for the video

[@bobbymorrie6331]

Very helpful explanation, thanks so much!!!

[@seecharan]

oh yes time is money, and your short video has saved me from the long make it last 3 hours coz I'm on the clock lecture from my economics prof... Thanks

[@wallopwallop9125]

Stacy Seecharan ur hard

[@paulsmith3820]

Tim does a better job in 20 minutes of explaining futures, swaps, calls, puts, etc. than my finance professors did in a whole semester.

[@joshmcormican]

It’s all common sense when it comes down to it and doesn’t have to be made complicated. Great that there are people like this guy.

[@barbie7927]

can i give a hug to this man. i understand this easily

[@zenzeleluckymtshali8433]

hi good morning

[@shivangigarg1924]

Did someone just explained me Futures, Forwards and Novation that quick and easy! Wish I would have come across this gentleman's videos earlier.

[@garimasingh4426]

This is the best explanation of the future markets. Thank you

[@sterdel1982]

the best teacher.so easy to understand

[@rajulingampally9692]

Very neatly and simple explaination,keep up the good work.

[@awsomenumberone]

I mostly understand this now! Thank you.

[@ashwinidivate..1881]

very clean and simplified teaching . i liked it

[@shannenss]

I like the way you explained & illustrate your point, easy to understand. Thank you for making this video.

[@omololaolowu3387]

Thank you so much for this!! You just cleared up the fog in my brain on this topic. lol

[@penbly]

Best Futures lecture EVERRRR

[@moonflower_1408]

Thankfully I found his vids before my upcoming first midterm exams. Thank you so much sir 😭😭😭..God bless you.

[@rajaiyer79]

What a great teacher! Thanks!

[@winlin11]

Best Teacher ever :)

[@arashyoo12345]

last 30 seconds answered a question i've had for very long time.

[@achrafkhallouli5378]

Such a great professor!

[@DavidSavon]

This video is superior. Thank you. I now understand futures. Superior.

[@zxstratoblack]

Brilliant. What amazes me the most is that what this gentleman says is perfectly understandable even by an Italian guy.

[@paulrony2752]

your videos are really very helpful in understanding investment concepts...very easy to follow as its explained in simple words...just simply brilliant..Hats off to u sir:)

[@paulthomas3362]

What a brilliant overview. I train people in my workplace on derivatives and this is a real cool example for someone leading for the first time

[@bhaskarjoshi17]

commenting on utube video for the first time coz its so good :)

[@fanpiras]

the best teacher ever

[@JWIN747]

This is a very nice explanation of Futures. Thanks so much!!

[@michaelinzo]

Thank you so much this video is very detailed and thorough!!

[@nitinnair2217]

wonderfully explained!! thanks mate!!!

[@xtramiles100]

Great video and very understandable with the A, B and C illustration.

[@Maffoo]

Very well explained, Tim. Cheersies

[@harrison1999]

This is most helpful video about futures I've found yet. I even enjoyed the stick figures. Thank you.

[@kytv9000]

Thank you for the helpful video. The end also cleared my question about what happens in the delivery day.

[@drukpakunley5659]

You Explanations are easy to Understand.... by chance... here I Am watching this same VIDEO AGAIN... .. And I Have learn ... More about how fluid the market is... and How it takes someONE like you to help the STUDENT connect all the DOTS.... I Thank you ... GREAT FULL I AM

[@Chamathi7]

Thanks heaps! Made more sense than the lecturer!

[@huythanhnv]

thầy giảng hay quá. it's concise and easy to catch up. Thanks for posting Derivative video series

[@abhilash8973]

Great Explanation Loved the cattle head example.. (chuckles)

[@yashchoudhary5212]

Amazing video, increased my understanding.

[@kyleong0622]

Thank you so much for this video MoneyWeekVideos. It really taught me a big chunk about what are derivatives really all about. I have yet to see your other videos regarding the other types of derivates and I can't wait to view them. However, I do have one question. It might seem quite odd but, what are the differences between trading derivatives and trading normal securities (such as bonds or stocks) other than the association of interests and dividends to bonds and stocks respectively?