Visit eToro now<\/span><\/a><\/div><\/span><\/span><\/p>\n<\/span><\/span><\/p>\n[stocks_table id=\u201c15\u2033]<\/span><\/span><\/p>\nWhat is futures trading?<\/h2>\n
Futures contracts are extremely popular among experienced investors because they allow you to trade on the future value of an asset without actually owning it. The basic premise is that you have to predict whether the value of an asset will increase or decrease on or before the expiration of the futures contract.<\/span><\/span><\/p>\nFor example, you can try your hand at the 3-month oil futures market. If the contract price is $50 per barrel, you have to determine whether you think oil will be worth more or less than that in 3 months. If you speculate correctly, you will win.<\/span><\/span><\/p>\nThere is no requirement to hold your futures contract until it expires. On the contrary, you can usually sell the contract at any time. This allows you to withdraw your profits early or mitigate your losses. In terms of tradable markets, futures can be available for virtually any asset class.<\/span><\/span><\/p>\nThis includes everything from stocks to oil, natural gas, currencies, wheat and gold. In Bulgaria, most futures brokers allow you to buy and sell futures contracts with leverage. For currencies it is up to 1:30, for gold and major indices \u2013 1:20, and for other asset classes \u2013 between 1:2 and 1:10.<\/span><\/span><\/p>\nHow are futures traded in Bulgaria?<\/h2>\n
There is a lot to learn before you start trading futures in Bulgaria, as this particular segment of the financial markets is quite complex. You need to be aware of what trading and risk management options are available to you before you start betting.<\/span><\/span><\/p>\nBelow you will read more about the key conditions you must meet to trade futures in Bulgaria.<\/span><\/span><\/p>\nAll futures contracts expire<\/h3>\n
When you invest in a traditional asset like stocks, you can hold onto them for as long as you want. Whether it\u2019s 10 weeks, 10 months, or 10 years, the underlying asset can remain in your stock portfolio indefinitely. However, this is not the case with futures trading.<\/span><\/span><\/p>\nFutures contracts always have an expiration date. In most cases, each contract lasts for a period of 3 months and expires on the third Friday of the respective month. When futures contracts expire, they must be settled. In simple terms, this means that there is a legal requirement for the holder of the futures contract to buy or sell the underlying asset.<\/span><\/span><\/p>\nFor example:<\/span><\/span><\/p>\n\n- Suppose you hold futures contracts on Ford Motors stock.<\/span><\/span><\/li>\n
- The futures contract consists of 100 individual shares at a price of $6 each.<\/span><\/span><\/li>\n
- If you still own the futures contracts when they expire, you are legally required to purchase 100 shares of Ford Motors at $6 each.<\/span><\/span><\/li>\n
- This would result in a total cost of $600.<\/span><\/span><\/li>\n<\/ul>\n
Whether you make a profit depends on the market value of Ford Motors stock at the time the contracts expire. If the value of Ford Motors stock was more than $6 per share at the expiration date of the futures contract, you will make a profit.<\/span><\/span><\/p>\nAll futures contracts have a price.<\/h3>\n
In the example above, we explained that you purchased a Ford Motors futures contract at a price of $6 per share. This means that you can buy the shares at the aforementioned price when the contract expires.<\/span><\/span><\/p>\nHowever, this will not reflect the current market value of the underlying asset. This means that at the time you purchased the 3-month futures contract, Ford stock may have been priced at $5.50.<\/span><\/span><\/p>\n
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In terms of the $6 stock price that is attached to your futures contract, that is what the markets believe Ford Motors stock will be worth in three months.<\/span><\/span><\/p>\nTherefore, your job is to determine whether the stock will be worth more or less than the price of the futures contract on its expiration date.<\/span><\/span><\/p>\nMinimum futures contract<\/h3>\n
When you buy or sell a futures contract, you are committing to a basket of assets. In the case of stock trading, a futures contract typically consists of 100 individual shares. In other asset classes, the number may be higher or lower.<\/span><\/span><\/p>\nFor example:<\/span><\/span><\/p>\n\n- In the WTI crude oil market, 1 futures contract is equal to 1,000 barrels of oil.<\/span><\/span><\/li>\n
- At $40 per barrel, this typically requires a cost of $40,000.<\/span><\/span><\/li>\n<\/ul>\n
The good news, however, is that most traders use leverage when accessing the futures market. In futures trading in Bulgaria, retail clients are limited to a maximum leverage ratio of 1:30.<\/span><\/span><\/p>\nWith that in mind, unless you want to risk thousands of dollars to access your chosen market, it is much more cost-effective to trade futures via CFDs. However, you will read more about this below.<\/span><\/span><\/p>\nLong or short positions<\/h3>\n
Once you have assessed the fundamentals of your chosen futures market, you need to decide whether you want to take a long or short position. This means you need to determine whether you expect the price of the asset to rise or fall on or before the date the futures contract expires.<\/span><\/span><\/p>\nFor example:<\/span><\/span><\/p>\n\n- Let\u2019s say a 3-month gold futures contract is priced at $1,800 per troy ounce.<\/span><\/span><\/li>\n
- If you believe that the value of gold will surpass this price in the next 3 months, you will take a long position<\/span><\/span><\/li>\n
- If you are of the opposite opinion, you will take a short position<\/span><\/span><\/li>\n<\/ul>\n
This is a major advantage of trading futures over traditional assets, as you have the opportunity to profit from both rising and falling markets. In other words, if you believe that an asset is likely to decline in price, futures allow you to take advantage of that prediction.<\/span><\/span><\/p>\nHow to profit from trading futures contracts<\/h2>\n
So, now that you understand how futures trading works in Bulgaria, we now need to explain how experienced investors make money.<\/span><\/span><\/p>\nBelow you will find a few simple examples of how futures trading would lead to profit.<\/span><\/span><\/p>\nExample 1: Long position on Disney stock<\/h3>\n
As we explained earlier, going long on a futures contract means that you believe the value of the underlying asset will increase on or before the contracts expire.<\/span><\/span><\/p>\n\n- Disney\u2019s stock price is $130<\/span><\/span><\/li>\n
- You purchase 1 futures contract on Disney stocks, which consists of 100 shares.<\/span><\/span><\/li>\n
- The futures contract is valid for 3 months and the contract price is $140<\/span><\/span><\/li>\n
- A few weeks before the contract expires, Disney shares are priced at $150 on the NYSE.<\/span><\/span><\/li>\n
- This is $140 more than the contract price, which is $140 per share.<\/span><\/span><\/li>\n
- You decide to withdraw your profits by selling the futures contract to your chosen broker.<\/span><\/span><\/li>\n
- Since your futures contract consists of 100 shares of Disney stock, you realize a total profit of $1,000 ($10 x 100)<\/span><\/span><\/li>\n<\/ul>\n
As illustrated in the example above, most traders would sell the futures contract before its expiration date. This not only allows you to withdraw profits, but also minimizes losses if the market moves against your predictions.<\/span><\/span><\/p>\nExample 2: Short position with oil futures trading<\/h3>\n
Now let\u2019s look at an example of a short futures position, which means you believe the value of the asset will decrease.<\/span><\/span><\/p>\n\n- The price of oil is $30 per barrel.<\/span><\/span><\/li>\n
- You purchase 1 oil futures contract, which consists of 1,000 barrels.<\/span><\/span><\/li>\n
- The futures have a 3-month expiration and a contract price of $27<\/span><\/span><\/li>\n<\/ul>\n
A few weeks later, OPEC announced that it intended to increase oil production, which would lead to greater supply on the market.<\/span><\/span><\/p>\n\n- Oil price reacts to open market<\/span><\/span><\/li>\n
- A few days before the contract expires, the price of oil drops to $20 per barrel<\/span><\/span><\/li>\n
- That\u2019s $7 per barrel below the futures contract price of $27.<\/span><\/span><\/li>\n
- You can withdraw your profits by selling the futures contract.<\/span><\/span><\/li>\n
- Your futures contract consists of 1,000 barrels of oil, so your total profit amounts to $7,000 ($7 x 1,000)<\/span><\/span><\/li>\n<\/ul>\n
The above example illustrates how futures trading in Bulgaria allows you to profit from falling markets.<\/span><\/span><\/p>\nFutures Trading in Bulgaria: Asset Classes<\/h2>\n
Futures trading gives you access to multiple financial markets.<\/span><\/span><\/p>\nAmong them are:<\/span><\/span><\/p>\nStock futures<\/h3>\n
Stock futures offer investors an easier way to trade stocks. You can take long and short positions in your chosen market, as well as take advantage of leverage.<\/span><\/span><\/p>\n
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In most cases, financial institutions only offer futures on major stocks, such as the leading companies in indices such as the FTSE 100, such as BP, Unilever and Diageo.<\/span><\/span><\/p>\nIf you are interested in trading US stock futures, this will also include technology leaders Facebook, IBM, Amazon, and Apple.<\/span><\/span><\/p>\nCommodity futures<\/h3>\n