One of the early questions my students ask is: "What is a future?"
The first ten students never asked and then one day, a student asked me, but after having traded for years, I was not quickly, precisely answer his question comprehensively because of all the complexity. And, as I suspect, other mentors having been asked the question have directed their students to
www.Investopedia.com or www.Wickipedia.com but, while those sources are good, the Chicago Board of Trade [CBOT] recently prepared a really good booklet comprehensively describing futures.
I also suspect that, when they started to write, they were thinking of a little 3 to 5 page booklet; but now the thing is 38 pages, if you don't have time for it today, save it for later. But, inquiry one of the above references for "financial futures" to get a quick definition.
But, suffice it to say, futures are the most opportune trading vehicle available to the entrepreneur!
What follows is that 25 word definition that you need to read on, but do not forget to come back to the CBOT Booklet when you are ready for all the right stuff.
A future is:
A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.
F
utures markets are characterized by the ability to use very high leverage relative to stock markets. This is what makes futures trading far superior to stock trading or investing. You do not need to start out with a zillion to trade futures! But, you do need to learn to trade effectively, efficiently and guard your risk with all your might. There are 3 types of futures traders: 1. Hedger; 2. Spreader; 3. Speculator. We are speculators.
