The origin of futures?

In traditional transactions, we will pay the money on the one hand and deliver the goods on the other. This is the so-called spot transaction. Futures is a trading contract signed now, but it deals with the future.

Jiro, for example, was a shopkeeper selling rice balls during the Warring States period, but recently the atmosphere of war has become more and more intense. Jiro is worried that the price of rice will soar when the war breaks out, and eventually he won't have enough money to buy rice for rice balls. Therefore, Jiro decided to buy this batch of rice with rice merchants at the current price before the rice harvest in the next season! As a result, Jiro paid a deposit to the rice merchant and signed a contract to "buy the future white rice", which is the predecessor of futures. ?

What is the biggest difference between futures and spot? Margin? The deposit is settled on the same day? There is usually no physical delivery after maturity. As long as you remember these three points, you can understand futures well.

Margin: Jiro wanted to order rice in three months, so he agreed with the rice merchant to buy a ton of rice in three months at the price of 1000/ ton, and signed a contract, but Saburo and the rice merchant did not pay the margin. Three months later, the price of rice fell to 950/ ton. Jiro thought that if he didn't fulfill the contract and bought other people's rice, it would be 50 yuan cheaper, so he decided to breach the contract and buy other people's rice. As a result, Jiro earned 50, while Mi Shang lost 50. Because Saburo didn't pay the deposit when signing the contract, the rice merchant had to bear the losses himself.

In order to ensure that there will be no breach of contract, Jiro and Mi Shang decided to take out a certain percentage of the total amount as a deposit when signing the contract and give it to the village head for notarization. No matter which party breaches the contract, the deposit belongs to the other party. So Jiro and Mi Shang signed the contract happily, and each took out a deposit of 10% of the total amount, namely 100. Is there a problem now?

After three months, the price of rice fell to 500/ ton. Jiro thought that if he broke the contract, he would lose the deposit of 100, but he could buy rice cheaply in 500 yuan and generally earn 400 yuan, so Jiro chose to break the contract again. Because the deposit (100) paid by Jiro when signing the contract was not enough to make up for the loss (500) of the rice merchant, the rice merchant had to bear the loss himself. In other words, the deposit system alone cannot put an end to the breach of contract.

In order to better enable both parties to perform the contract, the village head came up with a second method, that is, the system of settling the deposit on the same day. Now from the beginning, Jiro signed a contract with Mi Shang, and Jiro and Mi Shang each paid a deposit of 100. Who would have thought that the price of rice would drop to 900/ ton after the first day? The village chief thinks Jiro's loss is the same as his current deposit. If the price of rice falls again tomorrow, Jiro will definitely default. So the village chief deducted 100 from Jiro's deposit and gave it to the rice merchant, and updated the contract to read: After three months, Jiro paid the rice merchant 900 yuan to buy 1 ton of rice.

Jiro calculated and found that the village chief's behavior did not affect his interests; Mi Shang also calculated that the behavior of the village chief did not affect his own interests; However, Jiro found that his deposit was already 0. In order to continue to perform the contract, he must make up the deposit of 10% of the contract amount by tomorrow, that is, 900 x 10%=90. After Jiro pays the deposit, if the rice price continues to fall tomorrow, the village head will repeat the above practice to ensure that both parties cannot avoid losses through breach of contract.

Two months later, Jiro's rice ball shop closed down due to poor management. At this time, the price of a ton of rice is still 1050/ ton. Jiro thought: I no longer need this ton of rice, and there is no reason not to perform the contract, but if I choose to breach the contract, I will lose the deposit of 100. What should I do? As it happens, Jiyong, Jiro's neighbor, opened a restaurant. Ji Yong wanted to order rice a month later, so the village head arranged for Ji Yong to sign a contract with Jiro, stipulating that Ji Yong would pay Jiro 1050 to buy 1 ton of rice a month later. By signing a futures contract to sell rice, Jiro offset the futures contract to buy rice, and made a net profit of 50% without physical delivery. Jiro found that he only needed 10% to close the transaction, and this leverage operation made the income fluctuate greatly. Jiro began to learn to buy rice futures at low prices and sell rice futures at high prices. He became a speculator and reached the peak of his life. Summary: Jiro buys rice futures → opens a position → holds rice futures until the contract expires → When the position contract expires, Jiro pays rice → delivers before the contract expires, and Jiro sells the contract (rice) to others → closes the position.