Thursday, August 26, 2010

Screw order and reason, I'm starting at the middle of the list.

Futures!


This is a pretty fun one, and it stems from your traditional stock investment; it's a Level 2 of sorts (I need to stop playing fallout 3..)  As the name suggests, a future is the same thing as purchasing any old share, BUT you gain ownership of the share in THE FUTURE.


The concept is really quite simple:  You arrange it so that you will buy a specified number of shares at a given time in the future, but you decide the price right now.  All you're doing is making a bet that by the time you gain ownership of the shares, they will be worth more than what you paid.  From then on you can just treat them as normal shares.


     Now of course now you'll ask:  "But, Oh Great and Mighty Dan, in the end this is no different from a normal investment!  You buy cheap and sell high!"  However, foolish mortals, the benefit of futures is that you will usually arrange for a share price much lower than even at the current stock price.  Nevertheless, in a normal investment, you would have had a chance to sell your shares if the company started tanking for a prolonged period of time.  If you had bought a futures contract, you'd have to wait until much later when the listed value is even lower to sell your shares.




That's all there really is to it!  Until I find a fatal flaw in this article; if I do, I'll definitely update it.  Hopefully it's good already, so..  yeah!

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