#SpotVSFuturesStrategy
Here’s a clear comparison of spot vs futures :
🟢 Spot Trading
What it is: Buying or selling the actual asset ("on the spot") with near-immediate settlement (typically T+0 to T+2 days) .
Advantages:
Simplicity – Straightforward ownership, no expiry or contracts .
Lower Risk – No leverage or margin calls; limited to your actual investment .
Excellent for long-term holding – Ideal for "buy & hold" investors .
Liquidity – High in major assets (stocks, forex, crypto) .
Disadvantages:
Capital required upfront – Must invest full cost of the asset .
Missed short-term leverage – No way to amplify returns during quick price moves .
No hedging with contracts – Lacks built-in risk-management via derivatives .
Volatility exposure – You face immediate impact from market swings .
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🔵 Futures Trading
What it is: Agreements to buy/sell an asset at a preset price on a future date. These are derivatives traded on exchanges, with daily clearing and margin .
Advantages:
Leverage – Control a large position with a small deposit .
Speculation & hedging – Profit from both rising and falling markets; hedge price risk .
Standardized and liquid – Exchange-traded, regulated, and typically high liquidity .
Flexible strategies – Includes spread trading, arbitrage, basis trades .
Disadvantages:
Complexity – Requires understanding contract specs, rollovers, mark-to-market, etc. .
Higher risk – Leverage means small price shifts can cause big losses or liquidations . A Redditor notes:
> “Guy A buys spot and B longs a 1x future… B would get liquidated and lose all his holdings.”
Expiry/rollover costs – Contracts expire; rolling over can incur fees .
Margin calls and counterparty risk – Can be forced to top up and exchange credit risk exists .
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🔄 Price Dynamics & Basis Trading
Spot price reflects immediate supply/demand
