Future Markets

FUTURE MARKETS
The Futures Market is one in which contracts are

negotiated in which the parties commit to buy or sell a
certain good (agricultural product, mineral, financial asset
or currency) in the future, defining in the present the
quantity, price and expiration date of the operation.
Futures contracts can be signed on
agricultural products (wheat, coffee,
WHAT FUTURE MARKETS

DO THEY EXIST IN THE
WORLD?
soybeans), minerals (gold, silver,
copper, oil), financial assets (stock price
indices, fixed income instruments,
interest rates) and currencies, requiring
necessarily a standardization of the
quantity and quality of the product that is
negotiated.
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WHO PARTICIPATES IN THE MARKETS

OF FUTURE?
a) HEDGERS
- They are those agents who want to protect themselves from

risks derived from possible fluctuations in the prices of
the products that affect it.
b) INVESTORS IN GENERAL
- They are agents who are willing to
assume the risk of price variability, motivated by
the expectations of realizing a capital gain.
...... . ...................... .
CHARACTERISTICS OF FUTURE MARKETS
> LOW COMMISSIONS:
- Futures contracts have low commissions.
> LIQUIDITY:
- There is a market maker that guarantees a minimum supply and demand to guarantee
price formation.
> DIVERSIFICATION:
- It allows us to access a large number of financial products.
> RISK:
- It allows us to reduce the risk of our operations, since we can position ourselves both
upwards and downwards, reducing and even neutralizing the risk of the portfolio .
> REGULATED MARKET:
In the futures market there is a clearing house, which guarantees the
daily settlement of positions between buyers and sellers.
> SETTLEMENT:
- Futures contracts for differences (the most common) are settled daily, making a daily profit
and loss balance.
> CLEARING CHAMBER:
It ensures that there is no counterparty risk. Those who have won on the day
price difference will receive an income from the losing accounts for the price difference, this is
what the clearing house is in charge of.
ROLE THAT THE BAG PLAYS
> The stock exchange is the physical place where
negotiations take place.
> Futures operations are carried out through Stock Brokers,
who are duly registered intermediaries and serve as a
link between clients and the Stock Exchange.
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CONDITIONS TO BE TRADED IN FUTURE
MARKETS
There must be volatility in the price.
It must be sufficiently homogeneous.
> It must have a competitive market structure.
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- It is one in which a buyer and a seller
CASH CONTRACTS. FORWARD NOW FUTURE
> THE CASH

CONTRACT:
They agree on the price of a product of a certain quality and quantity for immediate
delivery.
> THE FORWARD CONTRACT:
- It is one in which the seller agrees
deliver a product to the buyer on a certain future date.
- It is the one by which the
> THE FUTURE CONTRACT:

commitment to deliver or receive merchandise from a
certain quantity and quality in a place, future month and price
also determined.
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The objective of establishing a short or put hedge is to protect the value of a
SALES COVERAGE
crop or the value of some inventory by making a sale contract in the futures
market.
The purpose of this market operation is to act as a temporary substitute for the
sale of the physical product at a later date.
The one with sales coverage owns, or will soon own, the physical product, but
will sell it at a future date. For example, a soybean producer can establish a
sales coverage for the month of May, but in reality he does not yet own the
soybeans because he does not harvest them. A grain trader can establish a
sell hedge even if he has not yet received the soybeans, but does know the
purchase price.
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PURCHASE COVERAGE
The objective of establishing a long or call hedge is to protect the cost of a product
by making a purchase contract in the futures market.
The purpose of this market operation is to act as a temporary substitute for

purchasing the physical product at a later date.
This coverage is used by exporters, processors and collectors who set a price for
their physical purchases at a future date.
By having opposite positions in the futures and spot markets any price fluctuation
in one of the markets is usually offset by the fluctuation in the other market.
CANCELLATION OF FUTURES
CONTRACTS
> FOR COMPENSATION:

- It consists of making a future contract taking a position opposite to that of
the contract that you want to cancel; This way of canceling contracts is
based on the behavior of the prices of the cash or cash market and the
future markets.
> WITH THE DELIVERY OF THE GOODS: - Cancellation with delivery of
the merchandise can only be made in the month of expiration of the
contract.
TYPES OF FUTURE MARKETS
> PRODUCT OR COMMODITIES MARKETS: - The objective is to
minimize the risk associated with possible fluctuations in the prices of the
products being traded.
> FUTURES MARKETS WITH FINANCIAL INSTRUMENTS:
a) FOREIGN EXCHANGE:
- In this type of currency markets, the objective is to minimize the risk in
fluctuations in the foreign currency process, since; These adopt
procedures similar to futures with goods.
b) OTHER MARKETS WITH FINANCIAL INSTRUMENTS:
> It covers a variety of instruments such as: Promissory notes, bonds,
savings certificates, interest rates, insurance, etc.
HOW ARE THEY LIQUIDATED?
FUTURES CONTRACTS?
>The settlement process can be carried out in advance or at maturity. It will be carried
out in advance by executing a future operation inverse to that determined in the open
interest, that is, making a purchase when you have a selling position or a sale when
you have a buying position. This liquidation may mean a total or partial decrease in
open interest.
>At the maturity of the instrument, however, all its open interests are definitively settled,
using the reference price of the cash market of the object asset for the valuation and
determination of profits and losses.
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OBJECTIVES OF THE FUTURE MARKETS
It is achieving the most efficient allocation of resources in the economy;

In this way, futures trading becomes an important planning and price
formation instrument.
Establish the strengthening of the capital market, by allowing greater

diversification of the portfolio or the various agents
economical.
11111111
ADVANTAGES OF FUTURE MARKETS
It allows producers to stabilize their cash flows, project their income into
the future and release capital.
Reduction of expenses (for producers) in freight transportation, making
their purchasing and selling decisions of physical merchandise more
flexible. Less presence of the public sector in the regulation of agricultural
prices.
It allows the farmer to guarantee his future income.
It allows economic agents to have greater effective protection of their
securities portfolio.
This market provides entrepreneurs with a management tool that allows
them to anticipate their financial costs for future dates.
CONCLUSION and-
A futures contract is an agreement to make a certain exchange at some point in time. The agreed date of
completion of the exchange differs from the date of the agreement.
Euromarkets have contributed to creating a global capital market, benefiting the growth of the global
economy. However, different traders can disagree on option values if they differ on the future volatility of the
underlying asset. Although the expression trading volatility is associated with trading options, these are a bet
on volatility, although they are also a risk management instrument.
Futures markets fulfill two main economic functions: they discover or inform about the future price of a product. In this
way, for example, the producer who sows wheat knows at the moment he sows what the expected price
at which he will be able to sell his harvest will be.
They allow risk transfers: The so-called hedgers can, through coverage, transfer the risks of price fluctuations to
speculative agents who are willing to assume them. In this way, futures markets allow for an efficient distribution of
risk between collectors and speculators.
Today there are a large number of futures and options contracts traded in markets around the world. These
contracts range from agricultural products to Treasury bonds, oil, gold, frozen shrimp, fertilizers, stock indices,
currencies and interest rates.
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Future Markets

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FUTURE MARKETS

The Futures Market is one in which contracts are

WHAT FUTURE MARKETS

WHO PARTICIPATES IN THE MARKETS

- They are those agents who want to protect themselves from

CASH CONTRACTS. FORWARD NOW FUTURE

> THE CASH

- It is the one by which the

> THE FUTURE CONTRACT:

The purpose of this market operation is to act as a temporary substitute for

> FOR COMPENSATION:

OBJECTIVES OF THE FUTURE MARKETS

It is achieving the most efficient allocation of resources in the economy;

Establish the strengthening of the capital market, by allowing greater

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