The futures market plays a significant part in the index of stocks produced and issues by different organizations. It might have both positive and negative influences on the stable financial development of a business, and this factor creates uncertainties in the stock market in general. However, by paying attention to this economic sector, it is possible to keep the Futures market under control and ensure that it does not ruin its performance.
The futures market is a crucial part of the global economy which is widely used in the twenty-first century. The main feature of this market is the ability of businesses owners to take part in auctions and buy or sell goods with the specified delivery details. Moreover, they have accurate contracts which do not change over time and provide people with stability. Originally, this type of market was popular in huge cities like New York and London (Sutcliffe, 2018). Nevertheless, it is becoming more popular in smaller world locations as many markets in the economic system are adjusted to electronic use. Compared to other stock markets, the Futures market can trade 24 hours per day, and it massively attracts new participants to this area of the economy. However, the short life span of the market does not allow the level of trust to grow at a high rate, and many misunderstandings might arise in those who start working in this area.
To eliminate uncertainty in the Futures market, economists need to understand the potential advantages and disadvantages of this principle. Some people believe that because of the lack of knowledge in this sphere, many businesses fail to analyze the Futures market’s work (Kim and Enke, 2016). Consequently, it brings confusion and unwillingness to cooperate with this system. Such advantages as the traditional style of stock and bonds make it easier to control income and expenses. Moreover, while using the strategy of the Futures market, economists can decrease the potential risk of bankruptcy. Also, people who work in this area have lower trading costs and longer trading hours, significantly increasing the general revenue.
Even though the Futures market might be considered less risky, some advanced economies can hide their illegal activities by high leverage. Many businesses use this system to hedge and decrease the risk of unstable prices on goods (Ankamah-Yeboah et al., 2016). This strategy can be considered unfair in relation to competitors. Moreover, such issues as lack of control under the future changes, poor price stability, and reduction in prices on assets when they expire may cause negative outcomes of the use of the Futures market. The word ‘futures’ means the inability to control several parts of investment contracts, and it might stop many people from using this market as a basis for trading (Ankamah-Yeboah et al., 2016). The prices might change significantly every day, and even though it requires fewer investments, the losses might be twice higher.
The Futures market might be confusing for beginners in trading, and it might cause many uncertainties about the business’s future performance. However, when all positive and negative sides are deeply analyzed, economists and owners of companies can find this system as a convenient and perspective way of increasing revenue. Even though the Futures market can bring unfairness and increase competition, people acting legally can build successful organizations without any concerns.
References
Ankamah-Yeboah, I., Nielsen, M. & Nielsen, R. (2016). Price formation of the salmon aquaculture futures market.Aquaculture Economics & Management, 21(3). 376-399.
Kim, Y. & Enke, D. (2016). Developing a rule change trading system for the futures market using rough set analysis.Expert Systems with Applications, 59(15). 165-173.
Sutcliffe, C. M. S. (2018). Stock Index Futures. Routledge.