I need help understanding why we trade in futures.
Why don’t we just trade with stocks and negative stocks.
A futures contract adds the variable of time, so you’re not only speculating on the value of underlying, but you’re speculating on the value of the underlying by a certain time. The extra information of time creates entirely different pricing models, and trading strategies.
Futures market for the most part (excluding securities) has served as an auction center where you can bid on commodities (sugar, milk, soy beans . . .) by a certain date and have them delivered to you. In theory the auction is for suppliers and buyers to exchange goods. In practice there’s also traders in between who want to take advantage of arbitrage opportunities.
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