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What are futures? - MoneyWeek Investment Tutorials

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What are futures? Tim Bennett explains the key features and basic principles of futures, which, alongside swaps, options and covered warrants, make up the derivatives market. Related links… - What are derivatives? https://www.youtube.com/watch?v=Wjlw7ZpZVK4 - What are options and covered warrants? https://www.youtube.com/watch?v=3196NpHDyec - What are futures? https://www.youtube.com/watch?v=nwR5b6E0Xo4 - What is a swap? https://www.youtube.com/watch?v=uVq384nqWqg - Why you should avoid structured products https://www.youtube.com/watch?v=Umx5ShOz2oU MoneyWeek videos are designed to help you become a better investor, and to give you a better understanding of the markets. They’re aimed at both beginners and more experienced investors. In all our videos we explain things in an easy-to-understand way. Some videos are about important ideas and concepts. Others are about investment stories and themes in the news. The emphasis is on clarity and brevity. We don’t want to waste your time with a 20-minute video that could easily be so much shorter. We’ve already made over 200 financial videos and we add more each week. You can see the full archive here at MoneyWeek videos.
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Text Comments (395)
shokkatoammerda (6 days ago)
I have a question for you. Why are you so the fucking number one!? The only one able to explain futures mechanism on yt
AllForOne M (24 days ago)
wow great job
George Mwangi (1 month ago)
Thank you so much for this tutorial, this was much simpler and way easy to understand
Nikhil Shingade (1 month ago)
Hi Tim, Your channel is simply brilliant. I have learned a lot from these, thanks a ton. Please keep it up. I have a question which is haunting me for days. As you have mentioned the Futures price in a particular contract is fixed for the duration of the contract. Also these is a statement, that the futures price converges to the spot price as the delivery date approaches. These two statements are contradictory to me as far as the futures price is concerned. Can you please elaborate this and help me understand what I am missing here.
Cass Luk (1 month ago)
I dont get how futures are different to options?
Bobby Morrie (1 month ago)
Very helpful explanation, thanks so much!!!
drno (2 months ago)
This is for people who do not want to do REAL work...why reward lazy people
drno (2 months ago)
More scams
Manzar Saqlain (2 months ago)
Really helpful. Thanks alot !
ken masters (2 months ago)
that helped
dhruv shedshyal (2 months ago)
Thank you Tim!all these days i had mistaken Forwards as Futures. If futures are not traded OTC , does it have a index ?
selvam gopal (3 months ago)
I am from India. I can not understand because your slang irritates me.
Hudson Caceres (3 months ago)
Sucks to suck my friend
Debbie Overman (3 months ago)
Brilliantly done, I love the phrase "and when you buying a head of cattle, you aren't just buying the head you are buying the whole beast." I laughed and laughed...I live in cattle country.
Anirudh B (3 months ago)
Beautifully explained!..kudos!
Eniah Baya (3 months ago)
How do futures contracts affect exchange rates?
Glenn Butler (4 months ago)
Brilliant teacher
sterdel1982 (4 months ago)
the best teacher.so easy to understand
Danny Phan (4 months ago)
Very helpful video, thank you so much. I have been trying to look for a detail explanation for so long
Sri nidi (4 months ago)
Navya (5 months ago)
whats the point if no one needs the commodity?
reddiamondxiv (5 months ago)
We need some new stuff Tim. Lol
reddiamondxiv (5 months ago)
Makes it simple and easy to absorb. Wish their were more recent videos. 👍🏽
reddiamondxiv (5 months ago)
I love his explanation. Very detailed and has visuals.
Israel T. (5 months ago)
Nice. Silver will be delivered!!
Xtra Miles (6 months ago)
Great video and very understandable with the A, B and C illustration.
GodricThe (6 months ago)
Did not understand first example, but second one worked as a charm.
blacksupreme777 (6 months ago)
Thank you
canada painter (6 months ago)
CORRECTION; Please tell me something I am a little confused about.. 0 = where the futures market is. I sell an Calls Option at 4 for $500.Two weeks later the market is at 3 ( the Buy options value is $700)...if the Buyer decide to get out of his Calls position before   market reaches  4... what will I lose? and what will I gain?
canada painter (6 months ago)
Please tell me something I am a little confused about.. 0 = where the futures market is. I sell an Option at 4 for $500.Two weeks later the market is at 3 ( the Buy options value is $700)...if the Buyer decide to get out of his Calls position before   market reaches  4... what will I lose? and what will I gain?
Leo Castro (7 months ago)
great video!! I understand futures much better now!
KillYourTV9000 (7 months ago)
Thank you for the helpful video. The end also cleared my question about what happens in the delivery day.
Sasha M (8 months ago)
The eureka moment came when you swaped names of producer and manufacturer to trader a and b. It finaly clicked in my brain. Awesome. Thanks.
Anatoli S (8 months ago)
You are a legend!
Greco Conduris (8 months ago)
Does the futures themselves have an impact on the commodity price? Like a feedback loop?
animeonperseest (8 months ago)
oh yeah, btc gonna go down
Timothy Spatz (8 months ago)
Damn, man. The Noise floor in that room is ridiculously high. Its hard to listen to you. Video could have used a little audio cleaning before uploading.
Eric ong (8 months ago)
good explanation....love to watch more video ..thanks a lot
rohit sharma (8 months ago)
loved it "the way you explained"
NutHouseProductionz (8 months ago)
Dec 18, 2017, Bitcoin Futures CME.
b.cage (9 months ago)
If the seller had to pick up a ton for 3000$ and sell it for 2500$, hes - 500$, but then you say he buys back.the contract for 3000$, which means that he would be down another 500$, so all together it would be 1000$ he is down, not 500$.
Steve Chi (9 months ago)
This is another really good tutorial: https://www.youtube.com/watch?v=P9PVzmHxzYo
Manu De Backer (9 months ago)
Modern man UK (10 months ago)
Great video
Jordan Victoire (10 months ago)
Delsin Rowe (11 months ago)
Thank you also explained the basic of trading in the stock market ect. futures
Delsin Rowe (11 months ago)
Thank you so much this video is very detailed and thorough!!
Michael Gotiashvili (11 months ago)
#1 advantage of these videos is that the host is not some Indus guy with a terrible pronunciation and it's a pleasure to listen to him!
Peter Hermans (11 months ago)
So is this how the price of gold bullion can be artificially suppressed by players acting on behalf of central banks to make the USD look strong and maintain confidence in fiat money?
Dawid Dudziak (11 months ago)
thx so much
Nicholas Carrigan (1 year ago)
Is futures trading only done for commodities? or can the same principles be applied to other securities as well such as Bonds and Equities? Great video! Thank you.
Shannon (1 year ago)
Lol at the cattle Thing
KeninBoulder (1 year ago)
The guy doing the video is charming. But why would you use a product that nobody can relate to in your example. It just adds a layer of complication to a subject we already do not understand. And if the producer is going to walk away $500 down why would he then buy the $3000 contract when he could just sell contract 1 and be $500 down. And what about the Market Maker? The ABC example would have been a perfect time to introduce the concept of the Market Maker. Does C not represent the Market Maker?
Really helpful! Thanks!
Rupa's Blog (1 year ago)
The examples which you share are just great and simple to understand
Thomasshole Müller (1 year ago)
What ultimately happens to the commodities when the contracts do mature?
vishal gupta (1 year ago)
Awesome explanation!!
Tshepo Bloy (1 year ago)
What does he mean by "Long" or "Short"?
Pradnil Donde (1 year ago)
Tshepo Bloy long means to buy...and short means to sell
Ritesh Patil (1 year ago)
One question though. If Trader A is the one who writes the contract to sell, then isn't he the loser anyway? Cuz 1) if prices rise, he is losing out on the price rise and has to sell at the strike price. 2) if the prices fall, Trader B is gonna buy from someone else rather buy at a higher strike price from Trader A. Or is there any other angle?
SaAng Soeurn (1 year ago)
"B" got hustled.
eric neumeyer (1 year ago)
Is it always 3 months?
Jules Sarran (1 year ago)
ALU MINIUM? Very distracting.
Numa PickFever (1 year ago)
Isn't the main difference between forwards and futures the fact that forwards are over the counter contracts while you need a clearing society to exchange futures? Therefore does trading future involve extra price to pay the clearing society?
zimbabwe jim (1 year ago)
last 30 seconds answered a question i've had for very long time.
Siddhant Gala (1 year ago)
Maffoo (1 year ago)
Very well explained, Tim. Cheersies
Gil Cohen (1 year ago)
when the money is transfer to A? at the end of the deal, or when he does the Short?
behnamasid2 (1 year ago)
Profit = 3.14
ilu 078 (1 year ago)
awesome sir....great explained. Loved it😍
Sir Boss (1 year ago)
So basically futures markets are all a fugazzi
Mel McCal (1 year ago)
How do I get started trading futures?
Lennaert Buikema (1 year ago)
Benny Ramos (1 year ago)
It seems like gambling to me.... and in response to zwelosterel, YES, his voice is soothing to listen to. I would like to have a teacher like that.
Luka Henigman (1 year ago)
What happens if the producer defaults?
Tshepo Bloy (1 year ago)
Luka Henigman He gets sued
Bezzzzo (1 year ago)
So trader B is the dumb money? lol
Hamid Mahdi (1 year ago)
I've never heard someone call another person a Muppet before lol. On a serious note, I truly understand the futures market at a high level thank you sir.
nadbad15240 (1 year ago)
Excellent Sir !!!
JLoureiro (1 year ago)
i just didnt understand what moves up the price from day 1 to day 2
Gerald Podsiadlik (1 year ago)
It's a change in the market price of whatever the commodity it. The change can happen for a variety of reasons and even be as simple as supply and demand.
Tronic Sfiso (1 year ago)
Dom Pops (1 year ago)
If I understood well the end, if you forget to close the contract before the set end date, you will receive the physical goods?
manan raval (1 year ago)
Yes, you will receive it.
Mira Aiman (1 year ago)
I prayed to God for a helper and He sent me Mr vladislav ( [email protected] optionstrade .cc ) , he gave me financial breakthrough , I have paid off my CC debt of 45,000 in just three weeks of trading with his strategy , contact him guys ! He is not from this world
IceKake2 (1 year ago)
any HEC Montreal students?
Spice Guy (1 year ago)
I enjoy looking at him. :-)
TommyR (1 year ago)
God bless you Tim, amazingly helpful for people wanting to get into this industry
LimitUpOnlineGuy (1 year ago)
Great instructional! I was going to add a similar "mechanics of futures" lesson to my futures trading tutorial videos, but I think I'm going to opt to set a link back to this page. No need for me to spend time attempting to do what Mr. Bennett has already done impeccably!
Melvin Leong (1 year ago)
dude.. i really was struggling to watch this.. i hung in there and relised that your amazing .. thanks for sharing your brain.
Zare K. (1 year ago)
Does A pay B $10 for the contract the day they enter into the contract? Just wondering when money actually changes hands. I understand he agreed to pay $10 and sells day two realizing a profit of $2. But if A didnt pay $10 on day one, how did he make a $2 profit if he didnt pay anything? Is he still obligated to buy at $10 at the set date even though he closed his position?
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Thank You.
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RASHAD GUPTAR (1 year ago)
thank you for the virus my friend
misbah haja (1 year ago)
option premium calculation ..pls
misbah haja (1 year ago)
It helped me lot in my interview
ajit566 (2 years ago)
In hindu mythology kauravs' and pandavs gambled on everything and the result was the great war " MAHABHARAT ". This correctly fits to present situation prevailing the world over and the result will be the great WWIII
ajit566 (2 years ago)
no need to go to casinos of las vegas.
Marat Avetisyan (2 years ago)
When in real life the actual settlement (asset/cash delivery) happens - after closing positions by counter-parties?
jmcp (2 years ago)
Great explanation
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MD.Hojaifa Hasan (1 year ago)
Mohamed Tarek (1 year ago)
hello more have
Marat Avetisyan (2 years ago)
Brilliantly and smoothly explained... thanks a lot!
hagin gimm (2 years ago)
if u need real trader life. find "s7futures" on youtube
brennanhm (2 years ago)
What percentage of the American GDP is this kind of gambling?
Andre Abelian (2 years ago)
excellent video . thanks
Anna Z. (2 years ago)
I liked the part about the cattle haha
BroadStreetRider (2 years ago)
awesome explanation thanks a lot
Nikolai Tinsley (2 years ago)
Why participate in future contracts with another party when you can just short the security on the exchange to mitigate risk?
redboy88 (2 years ago)
in future markets no physical delivery will take place in stocks they just square off !

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