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Chapter 43 Entering the Family of Derivative Financial Instruments (2)
Need to pay attention: When opening an account, you will face another important decision-how big an account should be established?Although this may seem simple, research shows that the size of your trading account is directly related to the success or failure of futures trading.In fact, most people with accounts of 10000 yuan or less are prone to losses.Only accounts with more than 10000 yuan have a more realistic chance of success.

Step [-]: How to issue an order

Mastering how to execute trading orders at a reasonable and favorable price is an important part of futures trading success.

(1) The client fills in the transaction order, and indicates in writing the client's name, transaction account number, trade commodity name, contract expiration month, quantity bought or sold, buying and selling price, execution method, order date, customer sign.

(2) After you give the order to the brokerage company, the order clerk of the brokerage company will call the order to notify the market representative of the futures exchange.

(3) The market-out representatives assigned by the brokerage company to the exchange immediately input the entrustment order into the exchange's trading system to participate in the exchange's centralized auction transaction.

(4) After the entrustment is executed, the trading terminal on the floor will immediately display the transaction result, and the order clerk will notify you again.

It should be noted that only two types of trading orders are allowed in the domestic futures market - limit order and cancel order.

A limit order is an order to buy or sell at a specific price.If you fill in an order, "sell 2188 lots of May 2000 soybean contract with a limit price of 5 yuan/ton", then when the market price is higher than 10 yuan/ton, your order will be executed. Moreover, the buying price must be equal to or higher than 2188 yuan/ton.A limit order has clear requirements on the transaction price, but whether it can be executed depends on the price change within the validity period of the order.If the limit price level is not touched, the order has no chance to be executed.

After the limit order is placed, if there is no transaction or only a partial transaction, at this time, you have the right to issue a cancellation order to invalidate or partially invalidate the original limit order.For example, after you place the price limit order "sell 2188 lots of the May 2000 soybean contract with a limit price of 5 yuan/ton", only 10 lots are sold, at this time, you can place a cancellation order.After canceling the order, part of the price limit order you originally placed will become invalid, and the other 5 lots will not be traded.

Step [-]: Margin and settlement
All buyers and sellers are required to deposit deposits to enter the futures market.A bond is a performance bond that certifies the good faith of a buyer or seller, helps prevent default and ensures the integrity of the contract.Margin can be cash, treasury bills allowed by the exchange, standard warehouse receipts, etc.Each customer must deposit a certain amount of trading margin with the futures brokerage company, and the brokerage company deposits the customer's margin into a special account.Then, the brokerage company uniformly deposits the margin into the exchange.

Buying and selling futures contracts usually only accounts for a small percentage of the contract value, generally between 5% and 15% of the contract value.The amount of margin is specified in the futures contract.Generally speaking, the more volatile the price of a futures contract, the more margin is required.

"Futures Merchant" Fan Li's Business Experience

According to the records of "Historical Records Huozhi Biography", Fan Li was not only a political and military adviser of the world civilization, but also a business genius.After Goujian destroyed Wu, Fan Li knew that all those who had served the king in history and made great efforts to achieve a great cause could not escape the end of being killed after success, so he secretly packed up the jewels and fled overnight with his family.He went boating on the five lakes, went round and round to Qi State, and planted crops by the sea.Within a few years, he earned hundreds of thousands of dollars.It caught the attention of the king of Qi and asked him to be a prime minister. At this time, Fan Li thought that he had gone from a commoner to a status of under one person and above ten thousand people. Economically, he was still a household of ten thousand yuan.Eating well, dressing well, and being praised and flattered by others is probably not a good thing.So he resigned to the king of Qi again, distributed most of his property to the local villagers, and moved to Tao (now north of Dingtao, Shandong).This time he stopped growing crops, he started futures, and within a few years, he became a billionaire.

In the Shandong area, there are many legends about Fan Li's business, and the famous one is Fan Li's horse trader.He has lived in Wuyue for decades and knows that good horses are needed there.It is not difficult to buy horses in the north. The price of horses in the north and the south is very different. This must be a profitable business.But the problem is that the transportation of horses is very difficult, and the transportation costs are high. There are many bandits on the road, which adds endless risks to this business.

After many investigations, Fan Li learned that there was a powerful merchant named Jiang Zidun in Qi State. He often trafficked linen to Wuyue.Therefore, Fan Li wrote a list and posted it at the main gate of the city where Jiang Zidun lived.The general idea is: I have newly formed a horse team, and as a reward for the opening, I can help people deliver goods to Wuyue for free.As expected, Jiang Zidun took the initiative to find Fan Li and asked to transport the linen.Fan Li readily agreed.In this way, Fan Li and Jiang Zidun traveled all the way, and the goods and horses arrived in Wuyue safely.The horses were quickly sold in Wuyue, and Fan Li made a lot of money.

The biggest commodity that Fan Li deals with is grain.In ancient China, agricultural products were the largest and most important commodities in the market.However, agriculture has a strong seasonality. The climate is different every year, and the output is different, which has a significant impact on market prices.However, seasonal and climate changes are regular. The so-called "six-year-old Rang, six-year-old drought, and 12-year-old famine" roughly alternates between good and bad years.According to this rule, Fan Li will boldly buy in good years, because there will be no bumper harvests every year, and he will not worry about the opportunity to sell the goods he has collected; similarly, when the price of grain rises in a disaster year, he will sell as much as possible, because he will not worry about not buying goods in the future. Chance.In this way, he not only made himself rich, but also stabilized the price of goods, preventing farmers from being hurt by low grain prices in good years, and poor people in bad years. This provided a valuable exploration for the subsequent dynasties to solve the problem of famine.

Fan Li summed up a truth from his short years of futures trading: "Expensive products are like dung, cheap ones are like pearls and jade." That is to say, when the price of a commodity reaches a certain level, it is willing to throw it out like dung; But if it is low to a certain level, you have to hoard it like a baby.This is exactly the same as the stock trading principle of "the more the fall, the more you buy, the higher the rise, the more you sell".Fan Li said: "If the price is too high, it will be cheap, and if it is cheap, it will be expensive." - The price of a commodity will inevitably fall when it is high to a certain level, and it will inevitably rise when it falls to a certain level.This is how the market regulates prices: if something is too expensive and no one buys it, the merchant will inevitably sell it at a lower price; if the price drops to a certain level, the merchant will no longer be profitable and will no longer produce, and it will inevitably rise again.

Aggressive financial futures

In July 1944, 7 countries held a meeting in Bretton Woods, New Hampshire, USA, and established the Bretton Woods system, which implemented a double-linked fixed exchange rate system, that is, the US dollar was directly linked to gold, and the currencies of other countries were linked to the US dollar at fixed rates. .The establishment of the Bretton Woods system played an important role in the economic recovery and growth of Western European countries and the development of international trade after the war.At the same time, under the fixed exchange rate system, the exchange rate fluctuations between currencies of various countries are limited within a very limited range (±44% of currency parity), foreign exchange risk is almost ignored by people, and the demand for foreign exchange risk management is naturally small .

In the 50s, especially after the 60s, with the economic revival of Western European countries, the number of US dollars held by them increased day by day, and their respective currencies tended to be strong. However, because the United States successively launched wars against North Korea and Vietnam, huge trade volumes occurred year after year. Deficit, the balance of payments continued to deteriorate, and inflation remained high, resulting in frequent dollar crises in which gold outflowed and the dollar was sold.

With the large loss of gold reserves in the United States and the precarious status of the U.S. dollar, the United States announced the implementation of the "New Economic Policy" on August 1971, 8, and stopped fulfilling its obligation to exchange U.S. dollars for gold.In order to save the collapsing fixed exchange rate system, at the end of December of the same year, the Group of Ten countries signed the "Smithsonian Institution Agreement" in Washington, announcing that the U.S. dollar will depreciate by 15% against gold, and the fluctuation range of the exchange rates of various currencies against the U.S. dollar will be expanded to ± ± of currency parity. 12%. In February 7.89, the United States announced another 2.25% depreciation of the dollar.The further depreciation of the US dollar did not prevent the US dollar crisis from continuing. Finally, in March 1973, after the foreign exchange markets in Western Europe and Japan were forced to close for 2 days, major Western countries reached an agreement and began to implement a floating exchange rate system.

Under the floating exchange rate system, the exchange rates between currencies of various countries directly reflect the unbalanced economic development of various countries, and reflected in the international financial market, it is manifested as frequent and violent fluctuations in the exchange rates between various currencies, and the foreign exchange risk is relatively fixed. Rapidly increased under the exchange rate regime.Holders of various financial commodities are facing the threat of increasingly serious foreign exchange risks, and the requirements for avoiding risks are becoming stronger and stronger. The market urgently needs a convenient and effective tool to prevent foreign exchange risks.In this context, foreign exchange futures came into being.

In May 1972, the Chicago Mercantile Exchange of the United States established the International Money Market Division and launched foreign exchange futures trading.The foreign exchange futures contracts launched at that time were all quoted in U.S. dollars, and there were seven currency targets, namely British pound, Canadian dollar, West German mark, Japanese yen, Swiss franc, Mexican peso and Italian lira.

Following the successful introduction of foreign exchange futures trading in the international currency market, exchanges in the United States and other countries followed suit and launched their own foreign exchange futures contracts, which greatly enriched the trading varieties of foreign exchange futures and triggered the innovation of other financial futures varieties. In October 1975, the Chicago Board of Trade launched the first interest rate futures contract.

After decades of development, there are now dozens of financial futures contracts that are actively traded in the world's major financial futures markets.There are three main types of varieties developed:

1. Interest rate futures refer to futures contracts with interest rates as the subject matter.The first interest rate futures in the world is the American National Mortgage Association's mortgage futures launched by the Chicago Mercantile Exchange in 1975.Interest rate futures mainly include long-term interest rate futures with long-term treasury bonds as underlying objects and short-term interest rate futures with two-month short-term deposit rate as underlying objects.

2. Currency futures refer to futures contracts with exchange rates as the subject matter.Currency futures are created to meet the needs of countries engaged in foreign trade and financial business. The purpose is to avoid exchange rate risks. In 1972, the international currency market of the Chicago Mercantile Exchange launched the first currency futures contract and achieved success.Subsequently, the United Kingdom, Australia and other countries successively established currency futures trading markets, and currency futures trading became a worldwide trading variety.At present, the currencies involved in international currency futures contract transactions mainly include British pound, US dollar, German mark, Japanese yen, Swiss franc, Canadian dollar, French franc, Australian dollar and European currency unit.

3. Stock index futures refer to futures contracts with stock index as the underlying object.Stock index futures is currently the most popular and fastest-growing futures transaction in the financial futures market.Stock index futures do not involve the delivery of the stock itself, its price is calculated based on the stock index, and the contract is delivered in the form of cash settlement.

To be precise, financial futures refers to a binding standardized contract between the two parties in the financial market to buy or sell a certain financial instrument at an agreed time and price.A futures contract with a financial instrument as the underlying object.As a kind of futures trading, financial futures have the general characteristics of futures trading, but compared with commodity futures, the subject matter of the contract is not physical commodities, but traditional financial commodities, such as securities, currencies, exchange rates, interest rates, etc.However, with the development of the financial market, financial futures trading has been ahead of commodity futures trading in many aspects, accounting for more than 80% of the entire futures market trading volume.Financial futures have also become an example of successful western financial innovation.

Forward contract hedging to avoid foreign exchange risk
In international trade activities, the prices of goods and services are generally denominated in foreign exchange or international currency.Today, when the floating exchange rate system is implemented, due to frequent fluctuations in exchange rates, it is difficult for producers and operators to estimate costs and profits when conducting international trade activities, and the resulting risks are called trade risks; in the international financial market If the foreign exchange rate of the loan rises, the borrower will suffer huge losses. The drastic change of the exchange rate can even swallow up a large enterprise. Central banks of various countries bring huge risks and national disasters in management, and this kind of exchange rate risk is called financial exchange rate risk.

(End of this chapter)