In share trading we trade the physical shares while in futures trading we trade the contracts of the physical shares. That's why in share trading without short selling, investors are always exposed to a 'naked position' of 'buy' as the initial action is always 'buy' from the brokers in the exchange. Meanwhile in futures trading, investors can sell the contracts first and then buy them after, directly from the exchange.
I didn't see any troubles in the current financial turmoil with a successful futures trading.
When Lehman Brothers filed bankruptcy on Monday 15 Sep 08 and the US market was down by 4.4% on that day, Australia and New Zealand were still in the evening. Next day, Tuesday morning, I set an open position of selling 50 contracts of ASX SPI 200 Dec Futures at 4,738 expecting a very big catch of a lifetime. (1 contract is valued at $25 per point, so with 50 contracts, if the ASX SPI 200 Dec decreases 1 point, I can profit $1,250.)
I waited for 2 days. I didn't trade on Wednesday cos I was doing something else. I knew that bad news was continuously spread by 'fellow media'. On Thursday 18 Sep 08 the price of ASX SPI 200 Dec Futures dropped to 4,616. So, by 122 points I reaped $152,500 profit.
ASX SPI 200 Futures has been my favourite toy traded in Sydney Futures Exchange (SFE). The price is tight to the index of ASX SPI 200, index of 200 Australian shares. A day rally in the US market (evening in Aus) frequently influences the next trading day in the Australian market. Sometimes the profit can only be taken before midday though. ASX SPI 200 Futures trading opens 9.50 am.
Current financial turmoil might not be an issue for some people. Yeah right...
I didn't see any troubles in the current financial turmoil
