Futures Brokers
Futures brokers are qualified financial professionals authorised to conduct futures trading on the Australian stock exchange (ASX). A futures broker may also be able to trade shares and securities like a regular stock broker, and they may even be qualified to trade other derivatives such as options or CFDs.
Futures contracts are called derivatives because they derive their value from an underlying asset, and normally a futures contract allows traders to buy or sell an underlying asset at a set price on or before a specified date. Unlike options contracts, futures contracts must be settled when the contract expires, and this increases the degree of risk.
While the potential for profit is limitless, so is the chance of losses, which is why a good futures broker is essential. Good futures brokers undertake a large amount of market research and should have specialist understanding in the underlying industry. Futures are often used to trade commodities such as oil or gold, but futures trading can occur over a wide range of elements.
Over-the-counter (OTC) futures trading happens when trading does not occur over a regulated stock exchange. Be particularly cautious if you plan to conduct futures trading in this manner, and always use a trusted futures broker.
Why Trade Futures?
Futures are specialist financial tools with various purposes. A futures contract allows two parties to set a definite price for trade to hedge against other market fluctuations, such as currency for example. It also allows businesses to profit from a liquid pool of trading parties, and most frequently for investors, this involves price speculation.
For example, if you believe the price of oil will rise, you could capitalise on that market prediction by taking out a futures contract that allows you to buy oil at the current market price. If the price does rise, your futures contract will be "in the money" and you will make a profit. Of course, if the market moves against you, you will have to absorb a loss.
In the same way, you can also trade declining markets when you believe prices will fall. A futures contract gives the right to sell a contract (even without physically owning it) at a set price with the promise to buy it back later. If prices fall, you buy your contract back lower and the difference becomes your profit. Of course, a rising market price will see you buy the contract back at a loss.
On top of this, perhaps one of the most attractive reasons to trade futures is leverage. For a small initial outlay, futures contracts use leverage to give you access to a large portion of the underlying asset. As an example, an outlay of $5,000 may give your broad access to $100,000 worth of stock. Small price fluctuation then become very important as market movements dictate your level of profit or loss.
Futures trading is not for the inexperienced, and it is not for everyone. Options trading carries significantly less risk, and there are other trading alternatives too. However, if you think futures trading may be for you, contact a good futures broker.
Find A Futures Broker
Australian futures brokers are common across many brokerage firms, and most of Australia's top brokerage houses have qualified futures brokers among other specialists. You can opt to do your own futures research or use the advice of financial professionals, and always make sure you understand the risk of any investment.
Use our online directory listing to find qualified futures brokers.