One article explains it all! The differences between spot and contract trading (Part 2)
Three, Trading Rules: Instant Settlement and Future Delivery
(1) Spot Trading
The biggest advantage of spot trading is its immediacy. After the buyer and seller reach a transaction, they can quickly complete the settlement of funds and goods, truly achieving "payment upon delivery." Even if the transaction cannot be completed on-site, both parties will settle in a relatively short time, transferring ownership of the goods.
(2) Contract Trading
The delivery time for contract trading is in the future, with the specific timing determined by the contract terms. Before the delivery period arrives, investors can freely buy and sell contracts based on market conditions. For example, in futures trading, investors can choose to hedge and close their positions before the contract expires, avoiding physical delivery. This trading rule allows investors to be more flexible in seizing price fluctuation opportunities.
Four, Trading Costs and Risks: Full Investment and Leverage Effect
(1) Spot Trading
Spot trading usually requires investors to pay the full amount for the goods, and the trading cost is the actual price of the goods or assets. For example, if an investor wants to purchase stocks worth 100,000 yuan, they must provide 100,000 yuan in funds. The risk of spot trading primarily comes from price fluctuations. If the investor buys and the price of the goods drops, they will face a loss in asset value.
(2) Contract Trading
Contract trading generally uses a margin system, allowing investors to control contracts worth far more than the margin they pay. For example, in futures trading, the margin ratio usually ranges from 5% to 15%. If the margin ratio is 10%, the investor only needs to pay 10,000 yuan as margin to trade a contract worth 100,000 yuan. However, leverage is like a double-edged sword; while it amplifies profits, it also amplifies risks. If the market trend is contrary to the investor's expectations, losses will also increase proportionately. When losses reach a certain level, investors may face the risk of being forcibly liquidated.
Five, Trading Places: Flexible and Diverse vs. Concentrated and Regulated
(1) Spot Trading
The venues for spot trading are very flexible, including traditional farmers' markets, shopping malls, and online e-commerce platforms. The trading objects are diverse, and the trading methods are relatively free. For example, shopping on Taobao is a form of online spot trading.
(2) Contract Trading
Contract trading is generally conducted in specialized exchanges, such as futures exchanges and securities exchanges. These exchanges have established strict trading rules and regulatory systems to ensure fairness, impartiality, and transparency in trading. For example, the Shanghai Futures Exchange mainly conducts trading of futures varieties such as metals and energy, and all transactions must comply with the rules and processes it has established.
Through the analysis of the above aspects, I believe everyone now has a clearer understanding of the differences between spot and contract trading. In the actual investment process, investors should choose a trading method that suits them based on their investment goals, risk tolerance, and investment experience. At the same time, it is important to fully understand the trading rules and market risks, remain cautious, and avoid unnecessary losses.