What are futures? - MoneyWeek investment tutorial

[richierich2k7]

Fantastic video very well explained.Thank you very much.It helped me a lot.Thanks again.

[asdnut]

Thanks a lot! Very well explained!

[mikegolf26]

wow!!!!! thanks you,i love it.

[theaquaplanet]

Naturally funny guy. Great vid.

[scoplisken]

Wow! This is just a big casino! Thanks for this video!

[zt1900]

Thank you!

[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!

[MySutti]

you r awesome in explaining...thank you sooooo much...from canada :)

[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...

[richkidsmartkid]

@MoneyWeekVideos Please do so!!!! And I am very interested in learning about all the different types of traders.

For Instance Prop traders, market makers, and execution trader? Would goldman sach trader make market and prop trade on the side? Why do a discount brokers also have their own traders?

I know my question sounds confusing, but basically I want to know the difference between types of traders, and who hires them, and how they make money for their employers.

[richkidsmartkid]

question: say the contract is about to expire tomorrow, who on earth would be on the opposite side of the contract?

I mean the last two people who are in the contract have to make physical delivery right?

[JimBean0587]

@richkidsmartkid Yeah, what would happen?

would both parties either agree to fulfill the contract? or would they novate the contrac? But then how do the two individuals contact each other and what if one is a trader and one is a producer who actually wants the commodity?

[richkidsmartkid]

@JimBean0587 hey I have found out the answer to this.

What happens is the broker will roll over your contract.

Say the current future you are holding expires at the end of Sept, you can sell this one and buy another future contract with exact underlying asset, but expires 3 months later.

So basically, you extend your contract for another 3 months. But there will be a slight spread between the sell price of your current contract and the buy price of the new contract.

[richkidsmartkid]

@JimBean0587 Also, future traders dont deal with each other. There is something called a clearing house, that takes on opposite side of each contract.

This way, you do not have to worry about the liquidity of other traders.