FUTURES vs STOCKS

Discussion in 'Trading' started by Javier, Nov 12, 2015.

  1. Javier

    Javier

    I would like to understand this.
    - There is not a free real time data for stocks, but there is for futures.
    - Required margins for Futures or opening acounts are much lower that in stocks. S I.eg.: 500$ vs 10000$

    But the point is that you could win much with a tick of futures (ES 12.5) than in stocks (Apple: IG commision 15$ and to recover that money you would need to trade a big ammout of shares and the price go in your favor for several days.)

    This is not much logic that you need much more money to trade stock for wining less than futures. Can anyone explain?
     
  2. tiddlywinks

    tiddlywinks

    Stocks are equity. Something you actually own. Able to be used as collateral. Able to be held into perpetuity. Able to handed down to future generations. Stock is an asset.

    Futures are binding contracts. You agree to take possession of, or to deliver the underlying asset on a specific date for a specific price. There is no equity. There is no ownership of anything other than a binding contract. The contract can not be held into perpetuity. It will expire, at which time, if still held, you take possession of, or you deliver the underlying asset. In the case of US stock indexes, cash is used to settle the terms of the contract.

    So simply, stocks are equity. You can rent the equity for trading, but the equity must be fully paid for. Futures are binding contracts that will expire. Until expired, you only pay for the "obligation" via a good faith deposit, to fulfill the terms of the contract at a specific time and price.


    Hope that helps.

    BTW: you should consider thinking about risk and let "winning" take care of itself.
     
    Javier likes this.
  3. Javier

    Javier

    Thanks it helps much =) good explanation