What are futures? - MoneyWeek Investment Tutorials

[@Taliecat]

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[@Taliecat]

Arloeric1 @

[@Taliecat]

That’s his G mail above okay

[@Thyago2420]

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[@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.

[@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 .

[@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.

[@deltaosceralfa]

“Some slightly undernourished chaps here” 💀

[@knowledgeiskey212]

Good video, Now I know what it takes to trade, relating to the investment I have going for me, I have been able to see the similarities on this video. Indeed I'm glad to have someone like Charles Alen making the right decision on my portfolio.

[@keatonmorgan295]

Thats encouraging

[@bertramknoesen9170]

What similarities do you speak of?

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@@bertramknoesen9170 I'm newly adapting to the whole trading process and it only take a well diversified market maker to point out favorable stock conditions or equivalently help to adjust your portfolio the right way, Charles Allen diversified asset allocation is ideal because it helps to reduce risk while maximizing return on my account.

[@allenshaquille8745]

There are numerous trading guideline out there to exploit and benefit from.

[@shilohnovick6115]

@@allenshaquille8745 I have always seeked for guidance but on exclusive market assets you will definitely need trading support to succeed.

[@johnrichardson2093]

Lovely practical video hereI was introduced to my current broker Mrs Sarah Pearson sometime during the lockdown period this has really turned out a huge blessing.

[@jonathanmaxwell7225]

I make huge profits on my investments since I started trading with Mrs Sarah Pearson, the strategies she uses are top notch.

[@janetravolta9247]

I’ve been making huge profits since I started investing with her. I earned my first $4000 in profits investing with her

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As a first time investor I started trading with Mrs Pearson with just a thousand bucks, my portfolio is worth much more than that now within just few weeks of trading with her.

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Amazing I also just started trading with Mrs Sarah Pearson, she is the best at what she does with an initial investment of $2400 I made up to $7230 in just a week of trading with her, her strategies are mind blowing

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Wow, amazing to see others who trade with Mrs Sarah Pearson I am currently on my 4th trade with her and my portfolio has increased tremendously

[@salmandeveloper]

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

[@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!

[@NicholasFainlight]

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

[@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

[@MoneyWeekVideos]

richsmartkid/jimbean0587 - contracts usually have a setllement date before expiry when anyone running an open position is offered the chance to close and cash settle to avoid delivery. Anyone left in the market after that date (usually only a small number of players) is assumed to want to go through with delivery. In practice this is unusual. A more detailed explanation of this settlement process needs another video! Perhaps I will make one...

[@duffygriffin9252]

Investing independently is more gambling then investing, There is a lot we can learn from KZbin clips but nothing beats expert advice. I earned over 750,000 USD in profit in the just concluded year trading with a portfolio Manager; Reed Cooper

[@duffygriffin9252]

here ([e-mail])

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What a coincidence i am trading with him as well he has the best trading strategy in forex trades

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I am so impressed with the signals am getting from Reed Cooper trades for the past 6 months

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I have been trading forex for more than a year now but i will actually say it got better when i let Reed Cooper manage my trades

[@dionethomas562]

I read about him last week he has an outstanding investment profile

[@INvestYOU]

awesome explanation thanks a lot

[@amberyang3489]

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

[@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!

[@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!

[@ncpriscilla4081]

Working with Mr Ernest I see how profitable trading the online market can be. I’m most pleased.

[@chinwendun6401]

I'm so happy for my trading activities lately. I work with my account manager Mr Ernest in earning maximum profits.

[@lawrencerodrigo8335]

I'm looking to invest massively in stock market but i lack a smart mentor who is good at handling investments any idea how i can connect with your broker?

[@ncpriscilla4081]

@@lawrencerodrigo8335 Count it as a favour, here's Mr Ernest's mail

[@chinwendun6401]

Wow you guys also trade with Mr Ernest Trading? that guy is a genius he keeps making huge profit.

[@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!

[@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?

[@annaz.8190]

I liked the part about the cattle haha

[@underoath257]

This is what I call a high quality education

[@kosh9639]

Sir, where would you like your 20,000 head-of-cattle.?. 🐂 😂 😂

[@arieftaufan8566]

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

[@luiscanamarvega]

This is absolutely fantastic. Thank you!

[@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.

[@marcosibuki7464]

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

[@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.

[@datchodidaopho]

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

[@richashankar7732]

This is my favourite KZbin series :)

[@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?

[@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

[@uksoontobeinaus706]

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

[@brennanhm]

What percentage of the American GDP is this kind of gambling?

[@BradHouser]

For every dollar made in profit, a dollar was lost also. Zero sum game, except for commisions.

[@divyaakashdutta4038]

@@BradHouser But what if the dollar lost was abroad and the dollar gain was in the US? Wouldn't that contribute to GDP?

[@shielajoynebato4191]

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

[@joannamrozek9884]

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

[@HamidulNasro]

I really appreciate your efforts! I need some advice: I have a SafePal wallet with USDT, and I have the seed phrase. (behave today finger ski upon boy assault summer exhaust beauty stereo over). How should I go about transferring them to Binance?

[@marmanlive]

Brilliantly and smoothly explained... thanks a lot!

[@hagingimm247]

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

[@leeshaoloung7302]

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

[@omololaolowu3387]

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

[@ErniCanouet]

I appreciate your efforts! 🙏 Need some advice: 🙏 I only have these words 🤔. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Not sure how to use them, would appreciate help. 🙏

[@biddydibdab9180]

“Futures” = insanity.

[@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

[@edgargallego1449]

Hillarious finish. I'm just wondering what I would do with all those cows.

[@dilshoddubai7197]

:))))))))))))))))

[@Peter-st6cv]

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

[@IPSINGHSANDHUU]

Thanks for your help. It's really helpful

[@kjbwefohiwljbvjbdsv1519]

Best Video on this topic. Thanks

[@mikhailtagallie8274]

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

[@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:)

[@superman0391]

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

[@jamespaul4618]

17:50 this is WHY 'they' call this a ZERO SUM game > tow winners and one big loser 18:45 No assets move when entire market is just speculating on the future price 19:05 The futures contracts can EXCEED the actual physical supply of the commodity 20:20 Never FORGET to close out all contracts.

[@DiaJasin]

12:24

[@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!

[@ajit566]

In hindu mythology kauravs' and pandavs gambled on everything and the result was the great war " MAHABHARAT ". This correctly fits to present situation prevailing the world over and the result will be the great WWIII

[@malthus101]

Great video. So.. when people talk about gold, and how the "real" price will explode because when people want to take delivery of their gold from the ETFs they trade, and the funds won't be able to deliver physical because they don't own the physical, this is actually spurious because, no one is expecting (or wants) delivery - they are simply trading the asset for speculative purposes. Admittedly, an ETF is not a forward contract. But are they similar in a way?

[@bakir_habul]

Very valuable formed educational video just a single misconception that In my belief is shenanigans. The derivatives financial contract are neither betting nor gambling- since that really does not require any knowledge while futures, forwads, options … require understating macroeconomics, economic concepts such as supply demand, policies, financial system, fundamental and technical analysis. All of that is distinct from gambling.

[@christopherellis2663]

Cashed up dills have died from playing the futures market. Blew their dough, followed by their brains It's a cross between Monopoly and Russian Roulette. 🚩

[@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.

[@ChineduPaulOnuegbu]

That's bad. Very bad (all gambling, no work, and a mortal sin). Thanks for the lecture. 100% lecture.

[@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!

[@rvadataguy4459]

OK thanks. So what is a Futures Index such as ES? How is it calculated when the NYSE is open? How is it calculated when the NYSE is closed? How is its price reconciled when the NYSE market opens?

[@bojandimitrijevic6659]

Very good. Bright explanation!

[@JanKnettig]

Nicely explained. Finally starting to understand it.

[@dragonchr15]

Excellent video! I can see how traders bastardize something meant to provide price and budgetary stability....

[@moneyprintergobrr6501]

A bought Bitcoin for $10 C comes along and decides to buy at $12300 thinking it will keep rising. C shoots himself in the head and never delivers.

[@BoloBouncer]

This is what I get for saying, "Wow, Football Manager is too simple for my tastes. Let me check out Wall Street Raider."

[@kooshakkaiser123]

Does A pay B $10 for the contract the day they enter into the contract? Just wondering when money actually changes hands. I understand he agreed to pay $10 and sells day two realizing a profit of $2. But if A didnt pay $10 on day one, how did he make a $2 profit if he didnt pay anything? Is he still obligated to buy at $10 at the set date even though he closed his position?

[@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?

[@noahschmartz2354]

Ureka mate @ 10.57 , I finally get it after watching several videos the penny finally dropped on yours.

[@vergil62]

This shows neither the cash flow mechanics of futures nor the role of the exchange in standing between the two counterparties. You have you understand the concept of initial margin and maintenance margin to see why and how this market operates. Every day you take your profit or loss and this cashflow can kill you, as it did with Barings Bank. Sure, speculators are the largest players in commodity derivatives and "locals", guys who play with their own money, often end up taking the final risk. Yet this is still a great way to hedge, or protect yourself, from price movement and lock in commercial margins and budget rates.

[@munbaba]

future contracts acturallt depists the realistic market overview where there is cut throat competition and every one is throwing dice over the other.

[@harrison1999]

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

[@adamk284]

Then you had this COVID anomaly when Crude Oil price dropped below $0 per barrel due to expiring futures and no demand for crude oil

[@EmilyAngela412]

I finally get it! thank you for your videos.

[@bbsonjohn]

Shit! I forgot to close out my future contract maturing today. I will receive 10k tons of aluminum metal at my backyard tomorrow.

[@thedawdgawd]

I have one question: When B agrees to buy the asset at 14$ then he is effectively betting on the price rising after 3 months, let's say the price rises to 18$, so he can sell it for 18$ and turn a profit. So you're assuming that B has changed his stance on the market forces?

[@trader6665]

Futures price done by riil sector. If the trader won, where the money comes from? From trader loss? I still don't get it about futures. Because it's different with stock, the price is accumalated by traders

[@polivetree]

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

[@codesymphony]

How is buying a future contract for $10 at market value different than buying a stock for $10?

[@georgesamaras2922]

The only reason to hedge against risk is if you think there is high propability of high price movements in short term future. Seller thinks price will go down for reasons and buyer thinks prices gonna go up for reasons. But its a zero sum. These are 2 opposite bets. I'm guessing its the fee guys that make all the money in the middle, also other people speculating with the tokenization of 'future production' of some good. So its a stock market .

[@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

[@AhmedAli-vu5bg]

Now I don’t understand this concept if trader B has sold the asset why would he need to buy again to avoid delivery ...he already isn’t in possession of asset...please somebody explain ...thanks

[@codemiesterbeats]

you are explaining this pretty well but most investment schemes are basically scams... you may make a buck but somebody else is making more. If I invest in a commodity I wouldn't be satisfied unless it was in my warehouse.

[@es330td]

What kind of misguided person thumbs down a video from a person attempting to help the public understand a complicated subject?

[@Giggidygiggidy12]

@Eric Poh the simplest answer is for a variety of reasons perhaps he's already locked up a cheaper supply elsewhere and he's not concerned, or maybe it was just an insurance policy to begin with for a just in case scenario. Perhaps his boss has to hedge another position and just told him to sell those contracts. Theres no one correct answer to your quest, though valid. Its the nature of markets. That's part of the reason why Economists make lousy traders, theories don't translate to reality

[@barbie7927]

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

[@zenzeleluckymtshali8433]

hi good morning

[@CabinOnTheWater]

So now they want to do this game with Bitcoin. I wonder how many contracts will be left open for delivery since owning and storing your own Bitcoin is so much easier than taking delivery of 20,000 cattle. lol

[@freestuffweekly5246]

*A-LOO-MINUM it sounds like you're saying a millinium. L2english pls

[@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...

[@orkhanhasanov1922]

Great explanation, thanks. But why is it legal? Nothing is produced, nothing is created and sold

[@pranjalsaxena7944]

After the first month when the MP has gone up to $3000 why would I ever agree as a manufacturer to novate the contract even if I believed that it was just a price spike?

[@critiquememockme2053]

Lol wow.... So they actually bought a whole lot of Cows..my goodness...not a complete loss. They could sell the cows and make back at lest 60% of the bill.

[@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.

[@karllogan5084]

You're talking shite mate, the bailouts were structured around buying bed debt from the banks (i.e junk CDOs, defaulted bonds etc). The money traders use is either from institutional or retail clients. Firms don't pump money onto trading floors mate.

[@damo87araimo]

Tim. Was the huge surge in copper price from 2004 to 2008 a result of China's urbanisation or was it a result of the western world speculating in commodity markets using derivatives? In your opinion, or anyone else's should they wish to comment?

[@ShopperPlug]

Good explanation... Honestly I wouldn't mind getting my profits in gold...

[@bobbymorrie6331]

Very helpful explanation, thanks so much!!!