Futures are financial contracts to buy or sell an asset on a fixed date in the future at a fixed price. Trading in futures benefits investors by allowing them to offset or assume the risk of asset price changes over time.
Futures fall under financial derivatives, which derive value from an underlying asset. Consequently, cryptocurrency futures represent the value of a given cryptocurrency.
Instead of providing all the capital necessary to buy the underlying cryptocurrency immediately, you only have to deposit a proportion of the market value when opening a futures position. Therefore, futures are the perfect instrument for traders to hedge against existing positions without buying the underlying crypto asset.
Future prices are calculated based on the underlying asset’s price on spot markets plus a futures premium. This premium can be negative, meaning that the future price is lower than the spot and vice versa. A positive future premium means that the futures price is above the value of the underlying spot price. The future premium fluctuates with changes in demand and supply for future products.
Position — a futures contract created by a trader — equivalent to creating an order for spot trading).
Long position — when entering a long position, traders speculate that the price of an asset will go up. They effectively agree to buy a particular asset at the current price in the future. When the price goes up, traders make a profit.
Short position — The opposite of entering a long position is when traders short an asset. By doing so, they bet that the asset’s price will go down in the future. When entering a short position, traders enter a contract to sell the underlying in the future at a predefined price lower than the current spot price.
Let’s check out the example below:
Two friends started trading bitcoin futures when the cryptocurrency price was $20,000. The first open a long position and the second short. Funds are “frozen” in each trader’s deposit. When the time of expiration (completion of the futures contract) comes, the bitcoin futures price is $25,000 per contract. It turns out that the trader who opened a long position earns $5,000 from the exchange, while the other trader pays the missing amount of the loss.
How to trade futures on FMFW.io
The detailed supported article on how you can trade futures on FMFW.io you can find here!
Available Trading pairs on FMFW.io
Trade LONG or SHORT against USDT:
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