What are futures? Do they tell me the future price? Why doesn't

>>2756556

From investopedia:

>Futures are financial contracts 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.

What does this mean? People are agreeing on contracts that are for a set price. So if people are settling for lower and lower prices, that means they believe whatever assets they are trading will fall, and want to lock in any price before they get left holding the bag. So they are called futures because they are contracts set for what people think the price will be worth in the future.

>>2756582
Minister you Satoshi

>>2756607

I have no idea what you just said, but I realized I forgot to answer your last question. The reason why not everyone uses them is that they are just people reacting to the market as well. You can think of it as another indicator. It's not 100% accurate. They can help in predicting and seeing what sentiment is like though, but it won't be a guiding beacon to finding perfect prices.

>>2756556
www.investopedia.com/terms/f/futures.asp

>>2756625
I hear futures have very high spread and people normally trade with large leverage. At least in the crypto world. I will try do some more research. Thank you

>>2756582
Minister you Satoshi

>>2756556
Thank anon, you are based, as usual.
Minister you Satoshi

>>2756556
Can you not fucking post this please, the fuckwit who always posts this might feel encouraged to start spamming again, I've already sent many people to his house, and he is on his last warning, if he does it again he will literally die.

>>2756699
Why do you want to kill him ?

>>2756754
You clearly have not seen what he used to do every fucking night, he single handedly ruined biz, and I saved it, with the help of a few biz brothers.

File: 1499406892600.jpg (14KB, 420x185px) Image search: [Google]

14KB, 420x185px

>>2756582
Minister you Satoshi

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15KB, 320x320px

>>2756625
I'm other words, futures are memes.

Futures are used for hedging or speculating. I'm 100% people on /biz/ wont use it for hedging.
Using it for hedging is simple so I won't explain it.
As for speculating, I personally wouldn't do it but if you were to do it you need a theoretical futures pricing model and I would use a self financing strategy.
A common example of a futures pricing model where the underlying asset is a bond would be
F = P(1+t(r-c)) where P is spot price of the underlying asset, t is time in years, r is financing rate and c is current yield.

Imagine the following scenario. Slightly exaggerated and highly simplified. The underlying asset is a 10% coupon 20 year bond with par at $100 and is deliverable against a futures contract in 3 months. Lets say the futures price on the market is $107 and you can borrow and lend at 8% p.a. But using the model above you should get $99 instead
In this case I would:
Short futures at $107
Borrow $100 for 3 months at 8%
Buy the bond for $100
The result at settlement in 3 months:
I should GAIN $107 from shorting the bond + $3 accrued interest = $110 total
I would have to REPAY $100 loan principal + interest $2.5 = $102.5
Therefore I would NET GAIN 110-102.5=$7.5
If I'm highly leveraged I would obvious earn a lot more

tldr: stick to cryptocoins

>>2756879
sorry accrued interest should be $2.5
interest from loan should be $2
and futures price using the model should be $99.5
but the net gain wouldnt change much

>>2756699
>>2756780
tldr pls