Futures

Sonray offer clients access to a wide range of Futures through our full advisory service or our award winning online platforms. We have a 24 hour dealing desk to assist with execution. 

A futures contract is a legally binding agreement made between two parties to buy or sell a commodity or financial instrument at an agreed price on a specified date in the future.

With futures contracts, the quantity and quality of the underlying commodity are specified and the future delivery date is fixed. The price is the only variable and is determined through the interaction of buyers and sellers from the time when the contract is first opened.

A Futures contract can be bought for a number of assets, from traditional commodities like Corn, Wheat, and Orange Juice to more diverse asset classes, including Government Bonds, Interest Rates, Energy and Stock Indices.

Futures are highly liquid financial instruments, enabling clients to trade the Futures Market on tight spreads. Transaction costs are low, and pricing is transparent due to the precise nature of a given Future contract and the regulations imposed by the various exchanges.

Hedging: As a risk management tool, investors can hedge (protect) their portfolio from a drop in value. For example, buying or selling futures contracts allows investors to hedge against a rise or fall in the value of the underlying financial product.

Leverage: The initial outlay for a futures contract is not as much as investing directly in the underlying financial product. An investor can therefore purchase a future (representing a pre-determined quantity of the underlying product) for less outlay and still benefit from a price move in the underlying product.  The ability to make a higher return for a smaller initial outlay is called leverage.  Investors however, need to understand that leverage can also produce increased risks.

Limited counterparty risk: There is limited counterparty risk when trading exchange traded futures contracts as the Clearing House for the relevant exchange stands behind the contract guaranteeing performance of the transaction.

Profit potential in both rising and falling markets: Futures do not require a rising market to make money. Due to the ease of shorting, investors can profit from both rising and falling markets depending on the strategy they have employed. Strategies may be complex and will have different levels of risk associated with each strategy.

Hedgers: Have an interest in the underlying commodity and are seeking to hedge out the risk of price changes (E.g. a Farmer).  Hedgers typically include producers and consumers of a commodity.

Speculators:  Seek to make a profit by correctly predicting the market movements of specific Futures contracts.

Sonray offer free online education to help you trade with confidence. 

The Australian Stock Exchange provides free general education:

• ASX Futures & Options
• Interactive Futures classes to help build your knowledge.