If you’re interested in the stock market, there are several ways you can make a nice little profit. Stock futures, or futures contracts, are one such way you can earn some money with online trading. If you’ve wondered how to earn money with stock futures, here’s a quick overview to get started.
What Are Stock Futures?
Stock futures are defined as contracts between traders that provide them with the ability to buy or sell a stock for a set price at a future date. The price of the stock is an agreement investors make, and the future date they set for trading futures contracts is when these assets will expire. When investors agree to the price of a stock or a commodity, one party agrees to buy a specified quantity and the other party agrees to take delivery of the asset on a specific date.
Many different financial players, including day traders, take advantage of trading stock futures. These traders typically use the futures market to actively buy and sell stocks and commodities, so they don’t actually want to receive the physical delivery of the asset or have to supply it.
How Can Stock Futures Be Profitable?
Trading stock futures allows investors to lock in a specific stock price and shield it from volatile price fluctuations down the road. There are two ways investors can trade in futures contracts. Firstly, corporations that actually need the supplies, or commodities, will set an agreement together for a certain price the buyer will pay for the commodity at a set date both parties agree to. Then, when the stock expires, the buying company receives the physical delivery of the asset.
On the other hand, day traders who actively buy and sell futures contracts don’t plan on ever taking or supplying the physical commodity in the future. Instead, they play the market to make a profit off of the fluctuations in the price of the futures contract specifically. So if the price of the commodity increases, the contract also increases in value. This means the trader who owns the contract can sell it for a higher price on the futures market.
How to Buy Stock Futures Online
If you’re interested in trading in stock futures for short-term profit rather than for a future date, it’s important to consider several things. Firstly, you’ll want to create a virtual account with a reputable trading platform. This is because you can get started with paper trading, which is a type of trading simulator that essentially lets you practice to learn the market before you actually start trading in real life. As you learn more, you can start researching and analyzing different stock futures contracts.
Secondly, consider using a stockbroker’s services. These are pros with tons of experience buying and selling stocks on behalf of their clients. Choose brokers who have experience superficially with trading stock futures, as these experts have the trading strategies needed to find the most profitable options.
Aside from that, it’s really simple to get started with trading stock futures online. Keep learning about the market and developing your ability to trade wisely so you have the best chances to profit.
Author | Emily Forbes
An Entrepreneur, Mother & A passionate tech writer in the technology industry!