What is a derivatives market and is it worth trading on it for a novice investor?

Regularly publishing reviews of stock market instruments, I undeservedly ignored the derivatives market. But it plays a huge role in shaping overall investment activity. It's time to figure out what the derivatives market is, how it works and why it is interesting for a lazy investor.

The derivatives exchange market is a platform where so-called derivative financial instruments (DFIs) are traded. These are futures and options. Their variety is almost inexhaustible. The underlying assets for futures and options contracts can be both stock market instruments (stocks and bonds), and exchange commodities (oil, metals, food), stock indices, currencies, bitcoin and even such exotic things as weather and box office receipts. cinemas. The main features of the derivatives market that attract traders and investors to it are high liquidity and availability of leverage, due to the low amount of collateral for trading instruments. This allows traders to have returns reaching hundreds and even thousands of percent per year. Let's look at the features of the derivatives market using the example of the Moscow Exchange.

Definition

FORTS is a section of the stock market founded by the Moscow Exchange, where instruments such as futures and options are presented. Now this market is the leader in trading futures contracts for the transfer of an enterprise asset for a certain time. Contracts are called fixed-term contracts because they are concluded for a certain period.

Simply put, FORTS is a branch of the Moscow Exchange where futures and options are traded.

Market Features:

• the subject of trade - the deferred right of delivery or the delivery itself;
• in an option, the seller and buyer have the same conditions;
• market instruments can be sold to third parties;
• transactions are concluded for a short period and bring high profits.

On the Moscow Exchange, an investor can purchase the following types of assets:

• derivatives on highly liquid securities of large companies, in particular, Sberbank, Gazprom and other enterprises;
• derivatives of popular Russian indices - MICEX, RTS;
• derivatives on currency pairs.

History of the creation of the MICEX

The first exchange was founded in St. Petersburg in 1703. It appeared in Moscow in 1839, and in 1992 the MICEX opened. Already in July 1993, the first currency trading began.

Every year the company adds new opportunities for customers.

The Russian Trading System (PTC) began operations in 1995. Every year the company grew and increased the range of its services. The Moscow Exchange began its activities in 2011, when PTC and MICEX merged into a single company. The purpose of the merger was the desire to optimize the Moscow Exchange.

Advantages and disadvantages of the market

The FORTS market has the following advantages:

• real trading platform with real quotes, unlike Forex;
• the activity is carried out legally, in accordance with current legislation;
• trading requires a small amount of money to make a good profit, 15,000 rubles is enough;
• all assets have high liquidity;
• a large selection of tools, which allows you to minimize risks;
• the presence of an evening session makes trading accessible to those traders who can only enter into transactions in the evening;
• You can purchase a large number of assets for a minimum amount;
• ease of trading;
• low commission and no deposit fees;
• availability of a large amount of information on the Internet;
• more favorable trading conditions compared to other markets.

Flaws:

• high investment risks;
• time limits on assets.

Is FORTS suitable for investors?

The FORTS market is one of the popular trading areas. But this is not an investment tool at all, since investments must be long-term or, at worst, medium-term, and this market is speculative, that is, short-term. However, some investors are willing to work on FORTS and also use it to diversify their investment portfolio.

If you decide to work here, remember that FORTS is a highly profitable and therefore high-risk one. To develop an effective trading algorithm on FORTS, you need to have a sufficient level of knowledge and experience working with other instruments. Unlike conservative investments, where the risk of losing capital is minimal, here there is a high probability of losing all your funds.

Therefore, I urge beginners or those who are not very confident in themselves not to deposit large amounts into FORTS at once. Even after “testing the pen” on a demo account, you cannot know for sure that everything will go smoothly. It is better not to rush into FORTS and increase the risk gradually.

Sections

FORTS includes three sections.

Stock

Here are the securities of large Russian enterprises. In addition, transactions on derivatives of major Russian indices are concluded in the stock section.

Monetary

Here they work with currency pairs. For this reason, this section is very popular among investors. The area offers a large selection of different currency pairs. However, traders prefer to enter into transactions using combinations such as Russian ruble/US dollar and Russian ruble/euro.

Commodity

Oil, industrial and precious metals are represented here. This section is also popular among investors due to the high volatility and liquidity of assets. In addition, even food products are presented here. These include sugar, flour and others. Supply contracts are concluded for such products, but usually transactions are concluded with the aim of reducing investment risks.

Common mistakes of new traders

Beginners often make the same mistakes:

• illiterate counter-trend trading. I remind you once again - I do not recommend trading against the trend for beginners! Before you trade against trends, learn how to trade with them. A novice trader may have problems determining the appropriate entry point. You can learn this only in practice, after first studying the theoretical basis;
• emotional trading. If a strategy doesn't immediately generate the returns you're hoping for, you may find yourself trading more erratically. Nothing good will come of this. Traders call a depressed state after a series of mistakes “tilt” and recommend leaving the exchange for several minutes or hours until your peace of mind returns;
• early profit taking. If the purchased shares begin to rise in price, the novice trader has a desire to sell them as quickly as possible. But usually there is no need to rush - you need to wait, because the upward price movement may continue, and then you will earn much more;
• graphs of the same scale. When analyzing the market, it is important to see not only the specific situation (for example, price fluctuations over the last month), but also a more general one - for six months and a year. Look at the charts at different scales - this will help you distinguish between the main and corrective trends.

Derivatives market participants

Participants in the Forts derivatives market include:

• traders – engaged in the purchase/sale of assets;
• Arbitrageurs are a type of traders, but these market participants specialize in ultra-fast trading on differences in asset values;
• hedgers - they use Forts to hedge transactions, but make money not here, but on the spot market;
• market makers – monitor the constant availability of orders.

Results

If you decide to make money using the exchange, you have two main models of behavior:

• trade independently;
• pay a professional to trade for you.

Both methods have their pros and cons. If you decide to trade on your own, you can try to master the exchange without outside help, or you can sign up for a training course. This way you will save time and money.

To be successful in trading, you need to choose one strategy and stick to it. Slowness and focus on results are two important qualities. Hasty trades, even if they bring a profit, will be much less than what you could count on with calmer trading. I hope this article helped you form an understanding of the basics of being a trader; share it on social networks with your friends.

Tools

There are two types of Forts instruments.

Futures

These are standard transactions for the acquisition or sale of a specific asset. They are traded at a specific price and have an exact validity period. After the transaction is concluded, both parties transfer the guarantee collateral to the Exchange account.

Its size is 2-10% of the contract value. Such a commission is charged to confirm the solvency of the parties to the transaction. In addition, this is a guarantee on the part of the Exchange of completing a transaction and reduces market risks in the event that one of the parties fails to fulfill its obligations.

The guarantee is returned to the transaction participant upon expiration of the contract.

So, if an investor has concluded a deal worth 20,000 rubles, then he is obliged to transfer 2,000 rubles to the Exchange account. This will be the guarantee. After a certain period, the cost of the contract increases by 2,000 rubles and amounts to 22,000 rubles.

As a result of its implementation, the investor receives this entire amount in his hands. This is how the guarantee is returned to him. Most often, the value of a futures contract changes when the price of the underlying asset changes.

There are several types of underlying futures assets:

• Stock. These are securities that give the investor the right to own part of a company. A futures contract for this type of asset brings profit in the form of dividends, as well as income from the difference in price during the period of acquisition and sale. The main advantage of this product is the ability to trade it until midnight, when ordinary shares are purchased and sold only from 10 to 18.30. This allows you to quickly react to changes in asset prices when the main market has already closed.
• Bonds. These are debt assets. By purchasing such securities, the owner becomes a creditor of the issuer. There are several types of futures bonds that differ in terms of validity. Securities can be purchased for 2, 4, 6, 10 or 15 years.
• Currency. Only futures on currency pairs are traded on Forts. Most often they include the Russian ruble, the American dollar and the euro.
• Indexes. These include RTS and RTS Standard, MOEX and the RTS stock index. Indexes are a calculated value that is determined based on the value of certain market products.
• Goods. Most often these are precious metals or oil.

Options

This is another stock market tool. The peculiarity is that the buyer does not undertake to fulfill the transaction at the end of the specified period. If he refuses to conclude it, the seller receives the investor's deposit.

There are several types of options:

• To the index. This type of derivatives market product is in high demand among traders. This is especially true for options on the RTS.
• For currency. Currency pairs are also presented here. This type of instrument is no less in demand than futures.
• For securities. These include stocks and bonds. If such a product was not purchased for the purpose of speculative trading, then after the expiration of the contract the investor becomes the holder of the corresponding security. As a result, the investor begins to receive a stable profit in the form of coupon payments or dividends.
• For goods. This type of option is often purchased by hedgers whose purpose is to hedge investments. Precious metals on the derivatives market include gold or silver. Any of the presented precious metals can bring such a contribution to the investor after the transaction is closed.
• For futures. Such an instrument is used as a product of speculative trading and an asset to reduce investment risks.

How to make money on the stock exchange - 2 real options

The stock exchange is a great way to gain financial independence. Moreover, income from it can be obtained in different ways.

Independent trading

To learn how to effectively trade assets, you will need a lot of time to master the theory and practice. Independent trading is a relatively risky business, but in the long term it can provide you with a comfortable life and impressive capital. You should consider this option if you:

• are willing to spend many hours on training;
• you don’t want to spend extra money on managing your funds (see the next method);
• ready to take risks.

Transferring your funds to other traders for management

If you are not ready to learn trading, you can simply pay those who already know how to trade on the stock exchange. Many busy people do not have the opportunity or desire to analyze the market, but somehow they need to manage their capital. This is why trust management exists. In short, you transfer the right to manage your money to a financial organization or trader who has a trust management license. The manager can invest your capital in profitable (according to his forecasts) securities and projects. From the income you receive, the trader retains a percentage for his work. Some management organizations set a fixed fee for their services.

Trust management can be active or passive. Passive management is when a trader compiles a portfolio of securities together with a client. Typically, such packages include long-term investments. The final decision to include a particular stock in the portfolio rests with the owner of the money, not the manager. He will not be able to change the package without the client's permission.

Active management can generate greater returns, but comes with certain risks. With this type of fiduciary management, the trader bets on short-term trading. He has the right to conduct transactions without notifying the client about them.

Trust management can be either personal or collective. In the latter case, several investors create a common fund, and the trader manages it as a single entity (this is called a mutual investment fund). Investors receive profits in proportion to their investment. The main advantage of this approach is the low barrier to entry. If with personal management the minimum amount is about 1 million rubles, then you can enter a mutual fund with 50,000 rubles in your pocket.

Trading Rules

Any transactions on the Forts derivatives market are carried out through a domestic broker. When choosing an intermediary, you should adhere to the following recommendations:

• check the availability of a license to carry out the relevant activity;
• check out the ratings of brokers; it is best to choose an intermediary who ranks at the top;
• look at the size of the intermediaries’ commission; it is recommended to choose a broker with the lowest rates;
• Find out if the broker allows you to open accounts online, this will make cooperation easier.

In addition, to work for Forts, you will need a deposit of 30,000 rubles. This requirement is imposed on traders by the Moscow Exchange.

To conclude a deal on the derivatives market, FORTS puts forward the only condition - a guarantee. The investor's account must have an amount sufficient to cover the GO. This money is frozen until the end of the contract.

The amount of the guarantee depends on the type and value of the asset. All prices are presented on the official website of the Moscow Exchange. It should be noted that the guarantee is calculated as a percentage.

Consequently, an increase in the price of an asset leads to an increase in GO, so experts recommend closely monitoring the cost of the investment product and replenishing your account as prices rise.

conclusions

Forts is an investment platform where traders have the opportunity to trade futures and options. This is a section of the stock market, which was founded by the Moscow Exchange.

Forts, in turn, is also divided into 3 sections: commodity, currency and stock.

There are 2 types of investment instruments on the site: futures and options. Each of them is represented by several types of assets, which include stocks, bonds, currency pairs, etc.

Concluding transactions on Forts without the participation of intermediaries is impossible. The futures market is not suitable for long-term investing. Beginners are recommended to trade futures at the initial stages, because... costs are lower than in the case of options, the transactions of which require experience.

Trading time

For clients who are interested in whether the Moscow Exchange works on holidays, as well as on Saturday and Sunday, I hasten to inform you that it does not - only a strict business calendar. The site has a specified strict description of the time of trading sessions. The main trading session begins with the opening auction at 09.50 and ends at 18.50. Moreover, the trading period itself begins at 10.00 and ends at 18.39.59. For foreign companies, the session is extended until 18.59.59. Trading sessions with the RPS are available from 9.30, and repo trading with the Bank of Russia is established on an individual basis. There are several technological modes depending on the tool.

There is an additional evening session from 19.00 to 23.49, and the duration is determined randomly in the range from 1 to 29 seconds.