Can futures contracts be held for the long term like stocks?

Jul 28 - 2021

Canfuturescontractsbeheldforthelongtermlikestocks?

Some novice investors have only heard of futures and may not know exactly what they are. Completely different from spot, which is a real tradable good (commodity), futures are not primarily a good, but a standardized tradable contract based on some popular product such as cotton, soybeans, oil, etc., and financial assets such as stocks and bonds. The contract or agreement to buy or sell futures is called a futures contract. The place where futures are bought and sold is called the futures market. Investors can invest or speculate in futures.

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Investors who have been in stocks for a while have probably been exposed to futures to some extent. What makes futures more advanced than stocks is that they have a shorting mechanism. What is the shorting mechanism? Simply put, it means that you can make money even if you fall, whereas in the values of many investors you lose money when you fall.

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Because futures are a two-way market, you can go long or short. For example, when you do a short single, you need someone to do a long single to match you, and your long single to close, you need to close at the same time someone short single to match you. So the futures model of making money is completely different from the stock, futures is basically a speculative atmosphere belongs to a strong market; and the stock market is a complete investment market, as long as you think which company has the prospect of development can buy what company.

Futures cannot be held for as long as stocks. The reason is that futures contracts have a very limited duration, generally speaking 12 to 18 months, and as long as the contract expires without closing the position, physical delivery will be required and a special VAT invoice will have to be delivered or received. But in a market full of speculators, physical delivery is basically impossible.

By:Josephine