Investing in futures and stocks is a hedging instrument that allows the person who uses it to secure the value of their assets at a later time. These instruments are considered “derivatives” because their price will be subject to the value of another instrument, called the “underlying asset”.
For example, the price of the futures contract on the dollar will obey the official value of the dollar; while the price of an option on a share will depend on the price of said share in the market.
The futures contract is an agreement between two parties to buy or sell an asset on a certain future date, at a fixed price. By means of this contract, the parties are obliged to carry out the agreed operation at the end of the term.
The investment in futures can be made on financial products (currencies, rates, indices, etc.), or on raw materials (soybeans, oil, etc.), in the case of financial products, a final delivery of the asset is not made, but a daily compensation of losses and gains is made, through a clearing house. On the other hand, when it comes to commodity futures, there is a delivery of the asset at the expiration of the future contract.
Investing in futures makes it possible for those who use it to insure the value of their assets at a later time, despite the fact that this hedge does not eliminate price variations, if it can significantly lessen their effects.
On the other hand, investment in options consists of a contract between two investors, where one of them is granted the right to buy or sell an asset within a previously established term and at a specific price.
There are two types of options: call options (call), which give the right to purchase futures and options sell (put) that give the right to sell an asset in the future.
In both cases, whoever buys the right, assumes the position of policyholder and for that right, must pay a price called a premium. As a counterpart there is an investor, who exercises the role of launcher and undertakes to sell (or buy) the securities, when the policyholder decides to exercise his right.
Investing in both futures and options can be beneficial, since in the first (futures), the gains will be the result of the difference between the purchase value of the future and the cash price that the asset has in the subsequent time. While investing in options, the gains originate from the positive fluctuation of the premium.
