What exactly are you trading when investing in Futures?

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The phrase ‘trading futures’ man more than just trading commodities like cotton, soybean or gold where it involves many other types of underlying assets in the futures sector. Basically, trading futures involve many other types of underlying assets that include the likes of stock indexes, securities and even currencies. So when you are venturing into investing into futures, what exactly are you doing?

First of all you need to understand the futures of commodities and this will include the usually common commodities that would fall into any of the following categories. Energy which involves gas, crude oil or heating oil, livestock that cover live cattle, pork bellies and such, agricultural products like wheat, cotton, soybean, rice, corn, palm oil, precious metal like gold, silver and platinum soft commodities like tea, sugar and coffee as well as metals like steel, copper and aluminium.

Currency futures are also common futures investment methods. Basically, this is where you trade a specific currency in anticipation of its future value. The other future in the financial sector are the interest rates and bond futures whereby you basically look into instruments and products which offer interests and this would include treasury-bill futures, Eurodollar futures and such which can be traded from other bourses. Under Bursa Malaysia, you can trade these futures through the MGS (Malaysian Government Securities) and KLIBOR (Kuala Lumpur Interbank Offered Rate) futures if you like.

On the other hand, you can also invest in equity index futures and it would include indexes of the major bourses around the world. In Malaysia, you can invest in the equity index Futures of FBM KLCI under Bursa Malaysia or you could also invest in the likes of the Straits Times Index and such. Locally, the FTSE Bursa Malaysia KLCI Futures (FKLI) is traded.

Alternatively, you can also invest in single-stock Futures whereby instead of investing in the equity futures, you can also look at a single stock. You will find that investing in Single-Stock futures offer you more leverage where you can choose between some of the companies that offer single stock future options that include Telekom Malaysia Bhd, AirAsia Bhd, Berjaya Corp and others.


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