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Investing in futures contracts

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Archie Heron
Investing in futures contracts

Futures contracts are an interesting alternative to equity investments.

By buying a contract for 100 stocks of a given company for USD 120 each, the investor guaranteed that on the contract expiry date, he would buy the above number of stocks at this price.

Each contract has certain parameters: the underlying instrument, maturity, the contract size (usually 100 stocks) and price (120 USD).

Contract parameters are predefined by the exchange and the investor can only choose from a range of available contracts the one that best suits his needs.

Thus, in the above example, the Investor will not be forced to buy 100 stocks on the expiration date - instead, he will only receive the difference between the determined price of a given company and the actual price of that company on the settlement date.

Let's explain it using the example of futures contracts for the WIG20 index.

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Archie Heron
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