Can someone explain to me what the hell are futures?

Can someone explain to me what the hell are futures?

Its like, the price of bitcoin, but in the future

That doesn't make sense no one noes the future price of a cryptocurrency

It's nothing more than a bet. Say Pajeet A has 50 street shit tokens. Pajeet B predicts they're going to go up in value since clean streets to shit in are hard to come by these days. But Pajeet A is bearish and thinks any street is a shitting street so these tokens will only decrease in value. Pajeet B says "Say Pajeet A, I bet you those tokens with be worth 10 sandbux in a month. And I'll buy them from you at that price." Well, Pajeet A only bought them for 4 sandbux, and he happens to know they'll be worthless in that time so he agreed and they enter a futures contract. A month rolls around a street shitting tokens have mooned to 50,000 sandbux (or 1 whole freedombuck). Due to the agreement though, Pajeet A must sell them to Pajeet B for 10 sandbux despite their current value. Pajeet B uses his sandbux to spend an hour in an internet cafe to make a shill thread and Pajeet A goes back to digging shit from his ass. Make sense?

>Can someone explain to me what the hell are futures?

It is the reason BTC price is utterly fucked.

see you on feb 17tth...BTC will be 5K

screencap this.

You agree to purchase X amount for $Y. The person who sells you the contract agrees to sell it to you for this price.

If the market price on the day the contract is exercised is higher than $Y, you've won because you are purchasing it at $Y and then you can sell it at the higher price. Converse is true if market price is below $Y: seller can purchase at the lower price and sell it to you at the higher one.

Options give you the right to purchase at a certain price but you don't have to, so your losses are mitigated to the price of purchasing the option contract. Futures are not like that, they are an obligation and must be fulfilled.

Ill answer this once and only once, you dumb little child

Futures are used by retailers to hedge. The only people using bitcoin futures are US based companies like coinbase and poloniex hedging their bitcoin

>Futures are used by retailers to hedge. The only people using bitcoin futures are US based companies like coinbase and poloniex hedging their bitcoin

and because exchanges can make markets like no one else, is it really any suprise they shorted their own holdings to oblivion and made 100;s of millions in the process?

How's a future different from a short?

This is great, but you forgot about the part of pajeets going manipulating the streets after contract to make it work for their favor.

Oh Jesus, this is golden

This is legit the simplest explanation I found. Thank you friend.

What happens on February 17th?

Pajeets shit the streets

Settled in cash

This is so much better than all the "A farmer wants to sell a ton of rice" examples on investopedia, thank you user

>>>/reddit/

You talk like a fag and your shits all retarded

What I don't understand is why anyone would get into options when they can get into futures?

HEY I've been here for two weeks I'm practically an old fag. I even witnessed the creation of this meme.

and you'll soon witness the death of it

these retards are day-trading, jesus

they didnt... Thats not how it works. The point is to minimize losses from bitcoins volitility

have to screen cap this

This is the kind of high quality content I come here for. And I mean that unironically.

Hi mom

I've only become annoyed by one thing during my time here. And that is fuckers using the word unironically so often.

Kys. You're annoying.

This is a great explanation but the point of a futures contract over just market trading isn't obvious to me.

If Pajeet A is betting the shit tokens will only decrease in value, and Pajeet B is betting they will increase in value, why isn't a market trade suitable? Why prolong the trade until a specified date via contract? Whether Pajeet B bought at 10 sandbux now or in a month, his gains are the same. Likewise, assuming Pajeet A honours his deal (a requisite of a "contract"), whether he sold now or in a month at the specified price is regardless.

Am I missing something?

>But Pajeet A is bearish and thinks any street is a shitting street so these tokens will only decrease in value

This doesn't make any sense to me. Why doesn't A just sell them at market value now, if he thinks they're going to go down?

That painting makes me think.. Milhouse.

Re futures, I think the big question is how can (((their))) futures market effect the crypto price. If it is, mechanically how? Is it just sentiment or..?

Whales do
They can bet that btc will be 10k tomorrow then they manipulate the price so it's 10k and they make more money that way

that actually isn't a future contract; futures require none of the underlying asset or.

say btc is worth 11k today. CME sets settlement date and price one month from now at 11k. Pajeet A believes it will be above 11k at settlement, Pajeet B below. They buy opposing sides of the contract from CME. In 1month at settlement BTC is worth 1K. Pajeet A owes Pajeet B the difference between settlement price and actually price at that time. Since CME contracts are for 5 BTC A owes B 50k which is paid in any currency (prob USD). At no point does other party need to deal in BTC

That's what I'm wondering in Likewise why doesnt B just buy now at market price if he expects it to go up.

The only case where a futures contract would be important is if a company needs to buy a hard/soft commodity, but only need the commodity in a year, it would be lower risk for them to secure a contract to buy the commodity at a pre-determined price in a years time. But why retail traders care about futures is beyond me. Unless I don't understand futures at all.

This is also why it makes no sense that everyone thinks Futures cause downward price pressure on the market. Not everyone is short. Half the traders and money on these contracts is going Long in the opposite direction as the shorters. There is equal incentive for price movement in both directions.

The point of futures is mostly hedging btw not speculation

this is fun, but wrong. Futures are not "just a bet". Also, futures have nothing to do with predicting the price of the underlying (if you wanna do that you just buy the underlying). Anyhow, I can't be fucked explaining this to you brainlets, just look up forward derivatives on wikipedia or something.

you guys are describing options not futures

LOL

It’s a deal for a future date. Works well in specific commodities such as coffee to ensure stability of price.

Otherwise the value would go up due to scarcity prior to harvest and then crash significantly right after.