What are futures? - MoneyWeek Investment Tutorials

[@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?

[@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.

[@_Salleh]

Thank you very much . Now I understand about future contract. Highly appreciate your explanation .Very informative and easy to understand for newbies . Malaysia .

[@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!

[@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!

[@superman0391]

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

[@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.

[@leeshaoloung7302]

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

[@underoath257]

This is what I call a high quality education

[@datchodidaopho]

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

[@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!

[@NicholasFainlight]

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

[@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.

[@marcosibuki7464]

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

[@arieftaufan8566]

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

[@barbie7927]

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

[@zenzeleluckymtshali8433]

hi good morning

[@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.

[@NateHeroic]

The only content I have found that actually explains futures.

[@MTEnth]

Finally an explanation that leaves no gaps in my understanding about futures. Thank you! 👏

[@richashankar7732]

This is my favourite KZbin series :)

[@MoneyWeekVideos]

It's possible, but unusual. Remember in a market there's a price for everything. For example people say to me "I just can't sell my house". They can - just have to drop the price far enough and someone will always buy. Occasionally markets suffer liquidity crunches where no-one wants to buy - we saw that a few years back with the credit crunch. That gets painful pretty fast for anyone who needs to offload assets/positions in a hurry.

[@amberyang3489]

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

[@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?

[@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

[@Taliecat]

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

[@Taliecat]

Arloeric1 @

[@Taliecat]

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

[@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

[@Peter-st6cv]

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

[@salmandeveloper]

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

[@ZenTradeGame]

Thank You! This was amazing!

[@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.

[@shannenss]

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

[@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.

[@clarencelee4911]

Best explanation I can find on the internet for futures

[@erycklelann1907]

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

[@larryporter3744]

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

[@MoneyWeekVideos]

Amipedia - it's a case of cutting your losses. Having agreed to the first contract either party could lose out if prices move the wrong way. Once that happens the first contract ensures you will lose money - it's just a question of how much! By staying in a loss making futures contract you could lose even more.

[@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.

[@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

[@shielajoynebato4191]

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

[@emphase6]

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

[@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

[@zxstratoblack]

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

[@garimasingh4426]

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

[@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.

[@mikhailtagallie8274]

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

[@penbly]

Best Futures lecture EVERRRR

[@nikhilfci]

This is gold. I was searching for this kind of video for quite a while to learn the essence of future trading. Now I can confidently say that YES I GOT THE BASIC COVERED.Thank you sir let me Jump into the market.

[@JanKnettig]

Nicely explained. Finally starting to understand it.

[@ashwinidivate..1881]

very clean and simplified teaching . i liked it

[@simone008]

For the 3 way scenario - Trader B was shorting at 10, but had to close at 14 to avoid delivery - can you explain why he had to close to avoid delivery when in fact his first move was to sell? Is this just purely to avoid him possibly losing more money if they price were to continue rising?

[@johnholme783]

Both comprehensive and simple to understand. Well done!

[@BoxLaneProductions]

Why has this been recommended all year non stop

[@nihalvlog7606]

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

[@sagarsingh1234]

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

[@LimitUpOnlineGuy]

Great instructional! I was going to add a similar "mechanics of futures" lesson to my futures trading tutorial videos, but I think I'm going to opt to set a link back to this page. No need for me to spend time attempting to do what Mr. Bennett has already done impeccably!

[@WongHonglond]

I have read book, research on internet, ask professionals, but no one explained it as well, clear, logical as you. thanks. going to an exam in a few days with more confidences now >.

[@abhaymarwaha524]

How do you spell the word that means when you replace one contract with the other? is it Novation? 7:02

[@moonflower_1408]

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

[@chioptnstdr3448]

I've never heard someone call another person a Muppet before lol. On a serious note, I truly understand the futures market at a high level thank you sir.

[@yodelingyoli]

Excellent videos! Non-native speaker here. What is the technical term you mentioned when parties change the futures' contract?

[@BornOfAsh]

Using your example, Where is and what chart do we look at to predict the price of aluminum?

[@sweeter62]

Brilliant explanation on this topic. It was difficult for me to find a video in youtube explaining how to trade futures market.

[@INvestYOU]

awesome explanation thanks a lot

[@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:)

[@MoneyWeekVideos]

richsmarkid - you could try my video "what do investment banks actually do" for some answers although I may need to shoot another video specifically on derivatives at some point. Watch this space!

[@sterdel1982]

the best teacher.so easy to understand

[@ViralKiller]

how can I buy a futures contract?

[@juan9306]

Trading agencies that will open an account for you and it will be something just like stocks/shares. The difference is that here, the prices are way more volatile, and for small amount of change of a price, you can either win a lot of money, or lose a lot of money as well.

[@jayzee848]

Talk to me

[@kristikg7431]

juan9306 - is there no expiration date in Futures?

[@ayonsaha7963]

@K G, there is. You must sell most of your assets before march.

[@drukpakunley5659]

Vivan Joks the same here ... This is a Fantastic video.... Clarity in the Explanation.... Truly A Great Teacher.

[@canefan17]

Seems very similar to options. You are agreeing to a strike price at a future date. So what’s the difference?

[@rbragadesh]

A forward contract is an obligation to buy or sell, whereas options are the right, but not obligation to buy or sell

[@jamesacosta6090]

what do u mean "sell a contract to buy it" at 13:26. Wouldnt you have to "buy" the contract, and then sell it when the price is higher than when u bought it? ... wouldnt the person taking the short have to sell the contract and hen buy it later when the price has fallen?..

[@Chris-eo1bp]

sell means you think its.going down and buying it.back thats basics.options i.believe

[@gantorisdurran710]

Trading Places is one of my fav films ever and now i actually understand it!

[@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!

[@maralghawsi]

Thanks a lot - you explanations were very clear and easy to understand.

[@JWIN747]

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

[@Wolfgaming1]

if the producer doesn't have the aluminium you say he can go to open market and get another futures contract, do these contracts need to have the same expiration? I'm confused on continuous contracts (roll over) and which expiry dates to buy. timestamp 9:30

[@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!

[@fanpiras]

the best teacher ever

[@arashyoo12345]

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

[@kjbwefohiwljbvjbdsv1519]

Best Video on this topic. Thanks

[@dhruvks9114]

Thank you Tim!all these days i had mistaken Forwards as Futures. If futures are not traded OTC , does it have a index ?

[@seek3n]

What about the future for an index? I cant find any videos on that. News keep saying the dow futures dropped whatever point. What the heck does that mean?

[@hamzatamne2983]

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

[@pradyotkkulshrestha5247]

Explained in laymen terms ; excellent

[@fan770728]

hi. im just wondering..what is a housing price future contract then? is there such a term called housing price future contract. and how does it work??

[@robfra18]

tim, with your example, surely a producer would have the commodity already available and would not need to buy it at the market price? Let's say they have it ready. What would happen then?

[@larkspurz]

Hi Tim, I'm confused. The "I" in contract 2 is the manufacturer? (Because he delivers back to producer for $3,000). Why would he do that? Doesn't he need AL to make his productions? And even if producers resell the AL it receives back from manufacturer for $3,000 he is already at $500 loss.

[@nikhileshkatare]

the second part u have told when manufacture comes with a contract with a producer, can we say this contract as option or it is a complete different phenomenon,, please elaborate with example...

[@reddiamondxiv]

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

[@casa0123]

Hi Tim you say that B ,in the three traders example, is a looser ? But he still has stock on his hands that has a grater value that he can try to sell and make a higher profit that he initially expected

[@Prak_u]

+Thomas Bowler Yep...except that B doesn't has any stock...they are just speculating...He mentions that it might happen that so big volume of copper is being traded which is not even present in the world.

[@5t3vi3Bswagbagent]

i made 46k off of copper yesterday rolling between 4 different contracts all around 2 dollars per pound...good day

[@virutronresearch5845]

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

[@DavidSavon]

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

[@reddiamondxiv]

I love his explanation. Very detailed and has visuals.

[@canefan17]

So are any shares of, say an S&P index, ever being exchanged/assigned in these scenarios?

[@winterskymoonranch]

Brilliantly done, I love the phrase "and when you buying a head of cattle, you aren't just buying the head you are buying the whole beast." I laughed and laughed...I live in cattle country.

[@Futurestradingadvisory]

Nice explanation of futures.

[@mohamedifthikhar7821]

So when the futures contract is not closed at the expiration time, buyer should buy the underlying stock/product at the margin price? If so what buyer will do if he doesn't have sufficient funds to buy?

[@zhubarb]

Tim, thank you. You are a gifted teacher.

[@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

[@akkus0]

Thanks a lot for the amazing Basics about Options and futures. I am a beginner and it gives me a good understanding about the concepts..

[@ajandresen2424]

Trying to teach myself this information so forgive me if this is a dumb question. In the example when the second contract was made. Why would the manufacturer agree to purchase the AL for $3,000 instead of the original $2,000? Didn't he essentially "win" since the price went up. In the beginning he said "somebody will win and somebody will lose". Thanks!

[@donkfrish]

From what I understand, people are just buying and selling contracts based on their prediction of the market. Does this mean that a manufacturer or producer will have to take possession of the contract when the contract is approaching its contract date? Or do the long and short positions from the ABC example not have a date on which the contract will be executed?

[@FluxProGaming]

Rithvik Mogali There are two kinds of contracts discussed here. What Moneyweek is saying is that if you trade a forward contract (not a future) it is a way to hedge (get rid of) price risk. So they can lock in two sides of a price and they dont need to worry about x, y and z both manufacturer and producer are happy with the price they will receive. In a futures market, only 1-3% of trades are actually carried out to deliver a commodity but traders enter the market like you said purely based on predictions. These contracts still have a maturity date associated to them but If I sign a contract to long (buy) 1 ton of steel and I also short (sell) a contract of 1 ton of steel, then these will cancel out since you have canceled out your obligation deliver by buying the same amount. Where you loose or gain money is where at time=0 the 1 ton of steel was worth 10 and now youre selling it at t=1 for 12$