The role of the stock exchange. A special role for scalpers

What until recently was available only to professionals, today is available to almost everyone. This, perhaps, the most exciting and highly profitable type of exchange trading attracts anyone who is ready to measure strength and intelligence with the same as he is all over the world! Fighting every minute during the trading day, experiencing a storm of emotions every day, they sleep peacefully at night. Every day they wake up to rush back into the thick of stock trading, winning penny by penny from the stock market reward for courage, bravery and discipline! They are intraday traders (scalpers and day traders). Their bread is short-term and ultra-short-term exchange transactions.

The intraday trader's bread was, and still is, very heavy. And this is no coincidence. After all, in order to make good money in a day, he has to borrow funds that he must return safe and sound at the end of the day. As a result, any of his operations carries a significant risk. That is why positional traders, those who carry their position through the whole day, are much less than those who make almost every minute transactions, in a hurry to fix their profits or minimize losses. In the latter case, the number of transactions sometimes exceeds a hundred.

The risk inherent in intraday trading is well rewarded. Just imagine that on an average daily fluctuations in major stocks are about 4%. It is enough for a trader to “catch” 1/10 of this fluctuation and its profitability for the year will be 100%! But this is obviously a one-sided assessment of the yield potential. Stocks fluctuate numerous times a day, and the average daily swing figure shown does not take this into account. So, in reality, the figure of 100% is underestimated. In addition, intraday traders are willing to use lending. The broker provides loans for day traders almost for free, he does not charge interest for lending if the loan is returned at the end of the day. This multiplies the initial estimate of the intraday trader's potential profitability by several times.

Thus, the goal of a trader trading intraday is hundreds of percent per annum!!! This is not a dream of any investor!

Scalpers occupy a special position among short-term speculators. They are literally scalping the market. Why scalp? From one transaction, by analogy with a real scalp, the speculator receives a thin (insignificant) income, usually only a few pips (a pip is the minimum price movement). Instead of a scalpel or a knife, the trader uses almost his bare hands, except for the computer. The entire operation of "scalping" takes only a few seconds, in difficult cases - a couple of minutes. The traffic they catch is so small that serious traders pay no attention to it. The composure of professional scalpers is amazing. In order to make good money, they sometimes have to remove more than one hundred scalps per day. And a hundred good scalps is already a decent jackpot!

The main analysis tool for the scalper is the observation of the "order book". "DOM" is a window in which orders for purchases and sales with volumes from all participants are visible. The scalper determines the moment when active demand begins to exceed supply, or vice versa, supply is more active than demand, and instantly makes a deal. And if the moment is determined correctly, then in the next seconds after the transaction, the market moves in the right direction by several pips, which the scalper gets as prey after the transaction (sale or purchase) is closed. But if the scalper incorrectly determined the moment, and the market, at best, did not move anywhere, then the scalper has to close the deal without profit or even at a loss. It usually closes immediately and without regret. Otherwise, the market may go much further against him, and then the losses will be too great.

Many in the market prefer other short-term transactions. These operations are also sometimes called the scalp, but their essence and nature differ from the scalper ones. From time to time, everyone, even the most conservative investor, wants to “speculate” intraday, which he does with pleasure. But real masters do this on purpose all day long, and not from case to case.

Adherents of intraday speculation believe that it is very risky to leave a position between days, as medium-term traders do. Indeed, you can turn off your computer after the end of trading and be sure that the growth will continue the next morning. But during the Russian night, events of world significance can occur, which will be reflected in the stock prices of America, awake at this time. Indices in the US will collapse, and after them in the morning we will open with a big gap (gap) down. The difference between evening and morning quotes can average 5%, depending on the situation and the liquidity of the shares, and if you do not have time to close, you can easily get a loss of 10%. Day traders consider such risks almost uncontrollable. To avoid them, they make intraday transactions, closing all their positions at the end of trading.

As we know, they lose little from this approach. Their target yield is simply huge! They have something to sit in front of computer screens for days on end.

Typically, real-time charts and order book tracking are used to analyze the market. Each short-term speculator has his own methods and approaches to work. Still, you can try to find common ground.

First rule: make transactions only during the day and do not leave open positions overnight. Second- do not think for a long time when making decisions, but rely on your experience and your homework. Third- discipline; if the decision is made, then implicitly and quickly implement it, even if this decision turns into losses. Fourth- do not think about profit and loss, do not take it to heart, focus only on the market. "Debriefing" to arrange only after the auction. Fifth- Do not start work under stress. Stress comes from large losses, wins, domestic quarrels and other shocks. sixth- do not engage in short-term speculation with low-liquid shares.

Usually, for most short-term intraday traders, one transaction lasts no more than 15 minutes. During the day they manage to make dozens of transactions. Although the number of transactions is not the goal.

At the same time, a trader monitors several stocks in order not to miss promising deals. Sometimes interesting situations develop on two or three securities at once. And here the speculator needs his reaction and skill in order to make deals on all shares at once. An experienced trader spends no more than 10 seconds on each paper. Total, for three promotions 30 seconds! Of course, such speed has largely become possible with modern software. But self-organization of speculators plays the most important role.

All intraday traders - both scalpers and short-term speculators - experience serious psychological stress every day. These are, of course, very strong and courageous people worthy of respect! Even after serious shocks, they find the strength to continue trading, achieving success. Iron discipline and the will to win distinguishes these people. Not every person is able to conduct daily short-term speculation on the stock exchange. But if he is capable, then a worthy reward awaits him!

The history of short-term transactions goes back to ancient times, when the first exchanges appeared. From the very beginning, it was not considered shameful to buy something cheaper in the morning with the opening of the exchange, in order to then sell it at a higher price at the end of the trading day to a late trader. Speculators have always created liquidity in the market and supported exchange trading even in the most difficult times.

Intraday traders, due to the peculiarities of short-term speculation, make a large number of transactions daily. Such activity requires the trader to be constantly up to date on the stock exchange and have quick access for quick transactions. Therefore, from the very beginning, such operations were available only to members of the exchanges. With the advent of the telegraph in the first half of the 19th century, the circle of traders engaged in short-term speculation expanded. This type of exchange operations reached even greater popularity with the advent of telephone communications in the second half of the same century. Little changed at first with the advent of the twentieth century. The telegraph supplied stock quotes, and the telephone was a way to give orders to the broker. And only with the advent of computers and computer networks, the expansion of the circle of supporters of short-term trading continued.

The appearance in 1988 in the USA of the SOES system (Small Orders Execution System) can be called a revolutionary moment. This system was designed for trading small lots of shares in the stock market. Since then, private investors have been able to trade remotely on the NASDAQ, almost on equal terms with market makers.

With the advent of the Internet, Internet brokers began to appear. Internet commerce has become very popular. At the same time, intermediaries and order delays continued to be costly for private investors. And about 10 years later, ECN (Electronic Communication Network), electronic trading networks appeared. With them, private investors got really direct access to stock exchanges, bypassing intermediaries. Direct access, along with Internet trading, has made it possible to attract a huge number of private investors to the army of short-term traders, who rent places in specially equipped halls, trade from home or from work. Trading stocks during lunch or even working hours in the US has become commonplace.

A slightly different development, but in the same direction, is taking place in the derivatives market. Platforms that have always conducted voice trading in futures and options are gradually moving to electronic methods of submitting orders, as well as introducing contracts that are traded only in electronic form. European stock exchanges have achieved the greatest success here.

In Russia, the foundations of electronic trading were laid in 1994-95, when the first public electronic trading systems appeared on the exchanges MCSE, RTSB (later the Russian Exchange). Any private investor could come to a brokerage firm and rent a place on the exchange floor to trade futures instruments. At that time there was no access to trading via the Internet. But the crisis put an end to the existence of these exchanges.

After the crisis, the MICEX became the center of electronic trading, which allowed brokers to connect their own programs through the gateway for placing orders on the stock exchange. 1999 can be considered the beginning of the heyday of Internet trading in Russia. And along with it, the restoration of lost positions by short-term speculators.

The prospect of the next few years is already visible, when traders will no longer need a computer or the Internet in our modern understanding to conclude an electronic transaction. Thanks to this, even more people will be able to quickly control the situation on the exchange and make transactions in direct access mode. This means that the number of intraday traders, professionals and amateurs, will also become even greater.

The opinion of a large number of people about the stock market often boils down to the fact that it is just a platform for speculation and making money out of thin air. Especially often, such reasoning can be heard in discussions of derivatives (futures, options). But is it really so?

The exchanges familiar to us are, in fact, a secondary securities market, in which the rights to a share of property or debts of companies issuing securities are redistributed. The companies themselves, entering the stock exchange due to this, do not receive any funding - when they say that as a result of a fall in shares, the company lost so many millions, then these are nothing more than beautiful words. in fact, there are no losses, except for image ones.

Organized secondary market trading mechanisms serve to redistribute securities between large primary investors (underwriters and investment consortiums) and smaller investment companies and private investors. The main turnover of securities takes place in the secondary market. Without the existence of this secondary market, the normal functioning of the primary market will also be impossible.

Thanks to the secondary market, individuals become the owners of securities directly or indirectly (with the help of investment banks and funds). The presence of a sufficient number of private investors allows the economy to function effectively, attracting huge amounts of money to solve its pressing problems.

The secondary market for securities is of two types - exchange and over-the-counter(more details), while the central place in the entire stock market is, of course, occupied by the first type. When working on the exchange, the investor does not see his counterparty in the transaction, and the exchange guarantees its execution. On the over-the-counter market, transactions are made directly between two counterparties (respectively, they also bear all the risks), and various low-liquid securities are traded there, the demand for which is not so great that the issuing company “bothers” with the listing on the stock exchange.

How the exchange works

Its functions include the organization of trading in securities - now almost all exchanges are electronic, that is, applications for trading are received there via closed electronic communication systems, and not by shouting, and are immediately displayed in the trading system.

The exchange must include:

• trading system, where orders for buying and selling are accumulated, they are “paired” in case of a price match, i.e. registration of transactions with various instruments and entries in the relevant accounting registers (eg).
• Settlement (clearing) house, which keeps records of funds of trading participants, delivers money for each transaction to sellers of securities and debits funds from buyers' accounts, carries out external and internal money transfers.
• Depository center, which, similarly to the clearing house, keeps records of securities of trading participants, delivers securities to buyers' accounts, debits securities from sellers' accounts, and clears securities based on the results of trading in authorized depositories.

Another important role played by an organized stock exchange is to ensure the liquidity of securities.

Liquidity is an opportunity to quickly and without significant overhead costs to sell or buy a security.

Due to the large number of bidders and a large number of securities that are simultaneously sold and bought, liquidity can be quite high. The exchange provides liquidity conditions for each specific paper in two ways: by a reasonable tariff policy, which attracts private investors, and by creating an institution of market makers.

Market maker- this is a trading participant who, by agreement with the exchange, is obliged to maintain the difference in purchase and sale prices within certain limits. For this, he receives certain benefits from the exchange - for example, the opportunity to make transactions with securities that are supported by the market maker with reduced commissions or without them at all.

Another interesting point regarding the role of exchanges in the stock market. Since the exchange activities are licensed and regulated by the state, the exchanges are entrusted not only with the functions of the organizer of trading, but also with some regulatory functions. For example, the exchange is required to monitor the market in order to prevent price manipulation, securities fraud and violations of the rules of brokering.

Why is it needed

First, securities redistribute cash:

• between countries and territories.
• Between industries and sectors of the economy.
• Between individual enterprises within the same sector.

Secondly, thanks to securities, investments in each specific enterprise are redistributed among large, medium and small investors. This process affects almost any citizen of the country, even if he does not suspect it. Thus, a conditional layman who has a deposit in a bank may not know and not think that the bank, using his money, could buy, for example, corporate bonds - this is how a particular person, unaware of this, becomes a source of development funds particular enterprise and the economy as a whole.

The third important function of securities is that they serve to fix the rights of owners to a share of the debt or property of enterprises (in the case of company securities) or to a share of the debt of an entire state (in the case of government securities).
Depending on the type of securities and the specific issuer, the income that securities bring can be different, from, in fact, a loss to astronomical amounts. Naturally, there is always a risk of incurring a loss - for example, in the event of the bankruptcy of an enterprise that issued securities, but over long time horizons - from 15 to 30 years on average - securities bring income that matches or exceeds economic growth.

At the same time, it is important to understand that the laws of physics do not apply to the stock market - in particular, the force of gravity. Many people often assume that since stocks have risen significantly in a short period of time, they are bound to fall. This is not entirely true.

Example: Over the course of 10 years, Berkshire Hathaway stock rose from $6,000 to $10,000. At this point, many decided that the growth was already quite significant, and missed the opportunity to make huge money on a price that in the next 6 years rose to $70,000 and even above.

As a reward for the risk that such financing of the economy entails, the holders of securities receive additional income: coupons, interest payments in the case of debt securities, dividends and appreciation in the case of equity securities.

Example: Dow Jones index. At the beginning of 1950, the value of this index was 201 points, and by the beginning of 2000 it was already 10,940. It turns out that in 50 years the index has grown more than 50 times. If someone had invested $1,000 in 1950, by the end of 2000 the amount would have increased to $50,000.

Growth from 74 years to date is also impressive

Thus, the role of the stock market as a place where securities are traded and capital is redistributed between countries, sectors of the economy and enterprises, on the one hand, and various groups of investors, on the other. Without the stock market, it would be impossible for the economy to develop effectively and meet the needs of every member of society.

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Hosted at http://www.allbest.ru/

Introduction

In economics, the concept of speculation is defined as making a profit by using price differences over time.

There are two main types of participants in the futures markets: hedgers and speculators. Hedgers use the market to minimize price risk. In the wheat market, hedgers are those whose main business is in wheat; they grow it, process it, sell it. Such people use the market to gain some certainty about the actual prices they will be offered to buy or sell wheat in the future. A farmer who has to sell wheat after harvest does not know what price he will get for it at the time of sale. He may choose to minimize risk by selling some of the crop ahead of time on the futures market, undertaking to deliver the goods after harvest. On the other hand, a baker or miller may want to secure future supplies

In recent years, the growth of speculative transactions has increased markedly, their objects have become not only futures contracts, but also options and combinations of operations with futures and options.

The presence of speculators is vital to the futures markets. The role of speculators in the economy will be discussed in this paper.

1 . The concept and characteristics of speculation and hedging

speculation futures hedging operation

Spectator is one of the specific subjects of market relations. A speculator is a person who seeks to guess price fluctuations in order to extract profits through the purchase or sale of futures contracts. In a civilized market, the speculator and the "black market" speculator are different types.

They also differ from each other - a speculator at the stage of formation of the market and a speculator of a mature market.

In the first case, he differs little from an elementary swindler; in the second, he is a kind of corrector of normal market relations, using the difference in prices caused by differences in the costs of production and circulation in different regions.

The speculator does not use the futures market in connection with their production, processing, sale or transportation of the product.

Based on the economic nature of speculative transactions, speculators as subjects of market relations are heterogeneous.

The sale of goods in an area where there is a shortage of it, at prices much higher than those at which this product was bought in an area where it is in excess, is a kind of correction of the resulting imbalance in exchange and distribution. These types of trade transactions are acceptable.

Speculators are not interested in making and receiving delivery of a particular commodity.

In developed market relations, the speculator contributes to the establishment of the necessary proportions between the value of the value of the mass of commodities and the effective demand of the population.

In futures trading transactions, the activity of speculators performs useful functions:

1. simplifies the sale of goods, securities on the stock exchange;

2. Compensates for failed transactions between sellers and buyers.

The speculator is one of the hundreds of thrones in hedging operations (insurance insurance). “He acts as a kind of intermediary between those short hedges (buyers) and long hedgers (buyers) in the trades? trov between them, during which the number of trade transactions increases, and market relations develop. Speculators dampen fluctuations in prices on the stock exchanges.

Stock market speculators are divided into "bulls" and "bears". "Bulls" play on the growth of stock prices by buying contracts during the period of rising prices, hoping to sell them at an even higher price. While the "bears" are selling contracts in the hope of buying them later at a lower price.

The goals of both types of speculators are to make a profit, albeit in different ways. The above division is not only conditional, but also unstable. This or that broker working on the stock exchange, in one case can be a "bull", in another - a "bear".

Another type of speculators are scalpers. Most often they are professional dealers working at their own expense. They change their position almost daily, make a lot of trades, easily catch the slightest fluctuations in market prices. Romanovsky A. A. Dealers in futures markets//Economic newspaper, 2015.S. 76

Speculators, as a rule, are involved in operations in only one market. The exchange allows you to fruitfully use the price difference, or spread. Since the terms of delivery of the same goods under contracts are very different, they will also be different.

Price fluctuations from normal levels are influenced by spreaders, another type of speculator. Spreaders sell goods at higher prices and buy at lower prices.

The functioning of various types of speculators on the exchanges contributes to the fact that prices begin to more fully reflect the actual value of the cost of goods.

Spec?tulation as a variety of business in the conditions of formation of market relations in our country will be able to develop.

Hedging (from the English hedge - insurance, guarantee) - opening transactions in one market to compensate for the impact of price risks of an equal but opposite position in another market. Usually, hedging is carried out in order to insure the risks of price changes by concluding transactions in futures markets.

The most common type of hedging is hedging with futures contracts. The origin of futures contracts was caused by the need to insure against changes in commodity prices. The first operations with futures were made in Chicago on commodity exchanges precisely to protect against sharp changes in market conditions. Until the second half of the 20th century, hedging (this term was already enshrined in some regulatory documents at that time) was used exclusively to remove price risks. However, it should be noted that the purpose of hedging is not to remove risks, but to optimize them.

The hedging mechanism consists in balancing liabilities in the cash market (commodities, securities, currencies) and opposite ones in the futures market.

2 . Functions of speculators and hedgers on futures markets

Operations in the futures markets related to the insurance of financial results are inconceivable without the existence of a special group of participants who take on the risk. This function in futures trading is performed by speculators. They take on some of the risk of hedgers, which ultimately leads to an increase in the volume of capital circulating on the market and an increase in its liquidity.

Speculators are the largest but least fortunate group of participants in the futures market. Although there are no official statistics on the successes and failures of speculators in the futures markets, however, some expert assessments were still made. According to these estimates, only 10 to 30% of the total number of speculators had a net profit in each year of their activity 2. But this does not prevent all new groups of participants in the futures market from trying their hand at speculative operations.

Most speculators are attracted by the hope of a quick net profit rather than concern for the welfare of the economy, however, the speculators themselves perform several vital functions in the futures markets that facilitate the trading of commodities and financial instruments.

Speculators take on the risk of hedgers. Without them, it would be very difficult, if not impossible, for hedgers to agree on a price, because sellers (short holders) demand the highest price, while buyers (long position holders) want to pay the lowest price possible. it is rather difficult to meet these mutual demands.

Without speculators, bidders would be forced to accept bids despite low prices, and bidders despite high prices.

Spectators are, as it were, a bridge over this price gap between supply and purchase, which increases the overall price efficiency of the market.

Speculators help increase the liquidity of the market, i.e. allow a market that allows you to quickly sell and quickly buy. With the appearance of speculators in the market, the number of real buyers and sellers increases, and hedgers are no longer limited to simply hedging the risks of others.

Hedgers are persons associated with real trading, i.e. Sellers and buyers of spot goods who seek to hedge against adverse price changes for their goods. Although hedging with futures contracts has become an integral part of many industries, it is not the only way to protect against price fluctuations.

In a liquid market with a large number of sellers and buyers, it is possible to carry out transactions of any scale with a slight change in prices.

At the same time, the arrival of speculators, by increasing the number of participants in transactions, promotes competition, and, as a result, more effective identification of an objective price.

The activity of speculators contributes to the relative stability of the market and generally eliminates price fluctuations. By buying futures contracts at low prices, speculators help increase demand, which leads to an increase in price.

Selling futures contracts at high prices by speculators reduces demand and hence prices. Therefore, sharp fluctuations in prices, which are possible in other conditions, are mitigated by speculative activity.

Speculation in the futures markets, like speculation with a real commodity, can be both net profitable and unprofitable.

But unlike real commodity speculators, futures speculators very rarely need to purchase a real commodity or financial instrument that would close the futures contract.

They buy contracts in the hope that the prices will increase, with the aim of selling them at a higher price and, therefore, to be in the p?tribe. They trade that contract, expecting the price to drop, so they can tribuy it at a lower price and again make a net profit.

The unique feature of futures trading is that the speculator can start playing on the exchange, both buying and selling. The decision of speculators about whether they will sell or buy depends on the forecast of the state of the market situation.

The potential net profit depends on the amount of risk that the speculator takes on and on his forecast of the market situation, or rather, his experience in forecasting price movements. Possible net profit and loss are equally great for speculators-buyers and speculators-sellers.

3. Technique of speculative operations

The technique of speculative operations is quite simple: if at the first stage the speculator sells a futures contract, then at the second stage he buys the same contract. And if at the first stage the player starts by buying a futures contract, then at the second stage he will sell.

If a speculator expects interest rates to rise, therefore, according to his expectations, bond futures prices will fall, then opening a short position provides an opportunity to benefit from a fall in the price of securities.

The speculator was in profit because he made correct predictions about price movements. However, the reverse situation is also quite possible.

If a speculator has made an incorrect forecast or has not paid attention to the change in one or more market conditions, he may be at a loss.

4 . Types of Spectators on Futures Markets

On futures markets, speculators are represented by two main types: down and up players.

The game to reduce is carried out by speculators trading futures contracts with the aim of their subsequent buyout at a lower price. The speculators involved in these transactions are called "bears".

Bull play is carried out by buying futures contracts with the aim of their subsequent sale at a higher price. Speculators of this type are called "bulls".

Speculative net profit is possible both in bullish and bearish trades. At the same time, it should be noted that in speculative operations, losses are also possible, often very significant. Therefore, engaging in speculative activity and investing in it is a business with a high degree of risk.

Different categories of participants can act as speculators on commodity exchanges. Quite often, this is done by professional dealers - who carry out transactions on their own behalf, at their own peril and risk.

At the same time, it can be "non-professionals" - various organizations and individuals (the so-called "public"), trading through brokerage firms. Kovnch De Sh., Takki K. Hedging strategies. -- M.: INFRA-M, 2013. p. 98

Speculators can be divided into large and small. However, these concepts are very conditional and can be understood differently on different exchanges. To brokers and their clients / Ulybin K.A., Androshina I.S., Kharisova N.L. etc. - M .: Institute of Youth, 2011. p. 123.

Speculators with a volume of transactions below this certain level are considered small. To a certain extent, speculators can be divided by differences in the methods of forecasting market conditions that they use.

Thus, the first group of speculators uses a fundamental analysis of the market, i.e., focuses on changing the factors that characterize the supply and demand on the market.

The second group uses triclad analysis, ie, it is based on information about price dynamics, transaction volumes, and the same level of interest rates.

Spectators are also divided according to the methods of conducting their operations, according to the strategy and tactics of trading.

Allocate:

* position speculators, who can be both professionals and non-professionals. They hold their position for a number of days, weeks or even months. Their forecast is based, as a rule, on long-term price dynamics, and short-term fluctuations are not taken into account;

* one-day speculators who hold a position for one day of trading. They allow for significant price movement throughout the day, and very rarely roll over to the next day. Kovnch De Sh., Takki K. Hedging strategies. -- M.: INFRA-M, 2013. P.87. Many of them are members of the exchange and carry out their transactions in the hall.

* scalpers who trade in the hall only in their own interests. Use the slightest price fluctuations. During the day they sell and buy a large number of contracts, by the end of the day they are closed. Ring "bulls" and "bears". -- M.: Politizdat, 2014. P. 16. With insignificant profits (or losses) on one operation, they receive the necessary level of profit due to the volume of operations. The activities of scalpers especially contribute to the liquidity of the market, since they account for the majority of operations. This tactic is also used mainly by professional speculators who trade for their own account;

* spreaders that use the difference in prices for different but related futures contracts. The spreader's net profit appears when using a certain ratio of prices for contracts for the same commodity group with different terms, or for different commodity groups with the same line.

5 . Strategy and tactics of speculative operations

Fruitful operations require the development of a strategy of speculation, analysis and forecasting of prices, and the ability to effectively poison the capital allocated for the operation.

For fruitful speculative trading, a speculator must, firstly, specialize in a particular market, and, secondly, limit the number of open positions he simultaneously controls.

The number of simultaneously controlled positions is set taking into account the factor of time that the speculator is willing to devote to speculative activity. So, for example, for non-professional speculators who do not have the opportunity to devote all their time to this occupation, it is considered prudent to have no more than five open positions at the same time.

For professional speculators who have staff and special equipment at their disposal, this limit may be one hundred positions.

A very significant role in fruitful futures trading is played by the tactics of operations and the competent management of available financial resources. Effective money management will not be able to provide a net profit from bad decisions, but it will be able to mitigate the impact of unprofitable transactions on the position of the speculator.

In the management of financial resources, three factors are correlated: risk, possible net profit and the amount of available capital.

Speculators in the futures markets very often evaluate risk by comparing only the contract price and the amount of the initial margin. Actually this is not true. The initial margin is only a guarantee of the proper execution of the contract. And the risk limit is either the full value of the contract (in the case of a long position), or unlimited (in the case of a short position).

However, this is only a theoretical dimension, as the price is rarely allowed to reach zero. How to estimate the degree of trisk p?tractically? The risk of a futures position consists of the following parts:

* firstly, with the amount that the speculator is ready to lose before he gives the order to close the position,

* secondly, the sliding factor, which takes into account the possibility that market conditions lead to a significant difference between the actual closing price of the transaction and the expected closing price. Redhead K. and Hyos S. Financial risk management. -- M.: INFRA-M. 2013, p. 234.

Consequently, the action of the second factor is manifested, which is much more difficult to assess. When characterizing a possible real loss, it is necessary to analyze the size of price fluctuations during the day, as well as the fluctuation of opening prices from the closing prices of the previous day. Commodity exchange - how to create it? -- M.: Economics, 2011. S. 34.

Conclusion

Based on the study, the following conclusions can be drawn:

The speculator is not interested in owning a cash commodity, his main goal is to correctly predict futures price changes and benefit from this by buying and selling futures contracts.

A speculator buys futures contracts when he anticipates a subsequent increase in prices, expecting to sell them at a higher price in the future. He sells futures contracts in anticipation of a price drop in the future, with the hope of buying them back at a lower price and making a net profit.

The futures markets allow speculators a very attractive profit opportunity through a high rate of financial leverage. As a rule, only 5-10% of the value of the contract should be paid in order to be able to profit from the change in the value of the entire contract.

A one-day speculator trades a position open during that trading day, rarely rolling it over to the next day. The volume of his operations is less than that scalper.

A positional speculator trades a position during a certain period of time in a period - from several days to several months. The position speculator is not interested in using small price fluctuations, but he plays on long-term market trends.

The spreader conducts operations using the price ratio of several futures contracts.

Speculators usually use two methods of price forecasting - fundamental analysis, or analysis of supply and demand factors, and technical analysis, based on plotting price changes, trading volume and open / position.

The foundations of fruitful speculative operations are the development of a deal plan, determining the ratio of profit and loss, the principle of limiting losses and a thorough study of the markets.

Hedgers are providers of real goods and services, and futures and options markets help to increase the efficiency of their activities. Futures trading could not exist without the active participation of hedgers. It is the hedgers that ensure the regular and bilateral inflow of buy and sell orders, which ultimately ensures the success of the futures contract. Unlike speculators and traders who can shift their interest from one market to another, hedgers are, in a certain sense, "prisoners" of their market. It is their constant attention to price changes that ensures a regular influx of orders and transactions in the futures markets.

The number of real market participants whose interest in reducing price risk makes them hedgers varies depending on a number of factors:

§ volume of the respective cash market;

§ level of price volatility (possible risk);

§ knowledge and availability of futures and options markets.

Bibliography

1. Exchange and exchange operations. -- Kemerovo, 2012.

2. To brokers and their clients / Ulybin K.A., Androshina I.S., Kharisova N.L. and etc. -- Moscow: Youth Institute, 2011.

3. Burenin A.N. Futures, forwards and options markets. -- M.: Trivola LLP, 2014.

4. Zavadsky P. L. Encyclopedia of economic terms. - M., 2015.

5. Ivanov K. Futures and options: hedging mechanism. -- M., 2014. (Exchange portfolio)

6. Kovnch De Sh., Takki K. Hedging strategies. -- M.: INFRA-M, 2013.

7. Ring "bulls" and "bears". -- Moscow: Politizdat, 2014.

8. Romanovsky A. A. Dealers in futures markets//Economic newspaper, 2015.

9. Redhead K. and Hyos S. Financial risk management. -- Moscow: INFRA-M. 2013.

10. Commodity exchange -- how to create it? -- M.: Economics, 2011.

11. Commodity exchange, securities market. -- M., 2014.

Featured on Allbest.ur

Similar Documents

Features of forward and futures contracts. Principles of speculative transactions and hedging. Legal regulation of the procedure for conducting operations with derivative securities in the Republic of Belarus. Types in the conditions for the exercise of options.

abstract, added 11/08/2010


term paper, added 02/06/2007


The concept and essence of speculation, the reasons for its occurrence. Stock markets: basic concepts, mechanisms. Speculative transactions in the futures markets. The main participants in trade transactions. Hedging and stock speculation. Creation and development of stock exchanges in Russia.

term paper, added 12/15/2014


Types of arbitration operations. Characteristics of the main types of arbitrage operations: currency and stock arbitrage. Analysis of futures contracts for 3-year bonds of Moscow on the RTS Stock Exchange 23. Recommended arbitrage strategies in the futures market.

term paper, added 07/13/2010


History and essence of exchange activity. Organizational structure of the exchange. Stock indices adopted in various countries. Types of securities and types of operations on the stock exchange. The essence of options, futures and forward contracts, hedging.

term paper, added 03/06/2011


The essence of speculative transactions with securities, their difference from investments. Ownership of a security as a technical moment of the operation, and not as its essence. Classification of speculative operations. Calculation of the profit (loss) model for the spread operation.

abstract, added 12/27/2010


Definition, purpose and characteristics of a futures contract. Comparative characteristics of forward and futures contracts. Organization of futures trading. The procedure for concluding and executing transactions for the purchase and sale of futures contracts. hedging strategies.

abstract, added 08/19/2010


Varieties and characteristics of currency risk. Factors affecting exchange rates. Purpose and objectives of hedging, measuring its effectiveness. Types and specification of futures contracts and currency options. Comparison of futures with forward contracts.

term paper, added 06/06/2011


Study of the essence, principles and main types of arbitration operations. Studying the theory of efficient portfolio. Arbitrage Strategies. Analysis of futures contracts for the RTS Index. Opportunities and prospects for the development of arbitrage operations in the futures market.

term paper, added 03/21/2014


Financial investment instruments. Securities, their types. Risk and profitability of foreign investments. Review of the Russian market of mutual investments. Interest rate risk hedging model using futures contracts. Initial placement of funds.

This is how the former, at best, party, Komsomol or state apparatchiks (in short, the former Soviet nomenklatura), who used to fight everyday Soviet speculation, and then came to power, or brought their proteges, successors and heirs to it, settled aside from the civilized of the world such a shadow speculative business "from the authorities", creating and implementing with impunity all kinds of corruption schemes for the distribution and redistribution of the produced national wealth and natural resources, becoming in fact the main brake on the development of post-Soviet countries.
At the same time, the change of power in many post-Soviet countries does not mean at all that these schemes will certainly be destroyed. It's just that these (and again invented by lured geeks) schemes are "sit down" by new people. Moreover, if there is a mess in the country and a constant confrontation between different parties, oligarchs and other opposing forces, it means that they cannot divide these schemes among themselves. And if “order” and strong power have been established in the country, it means that all the main schemes have been crushed by the leading “dictator”, who, being the most important, and in fact the only oligarch in the country, sits on them together with his closest “family” environment and bureaucracy. In any case, the new-old ones in power, as a rule, continue to rob their people in the old way and with impunity, at the same time slyly telling them about the shortcomings of the nasty speculative West, intimidating them, daring them away, but at the same time keeping and spending their money there with pleasure. considerable capital. They intimidate, dare, and will continue to do so, because they understand perfectly well that with the admission of open civilized free markets to their patrimony, it will be much more difficult to build and implement such shadow speculative schemes, as well as easily go unpunished. However, as well as decades to dominate in power. Do we need such speculation? P.S. The other day I talked on the phone with my old childhood friend, who decided to go into business - agricultural production, apparently, including wheat. But to run this business, he needs land on the territory of his residence in the Poltava region. For those who are not in the know, I want to inform you that in Ukraine, after the collapse of the collective farms, their lands were soldered, i.e. divided into plots (shares), and distributed for permanent use to former members of collective farms. For each collective farmer - one share with an area of ​​about 3 hectares. But at present, practically none of the villagers really processes their own shares. After all, the former collective farmers are mostly already old or deceased, and the bulk of their heirs have long since left for the cities. And it is not profitable to cultivate such a limited area somewhere far away in the field. Therefore, the majority of the villagers long ago leased their shares either to single local small "farmers" or to large agricultural producers. Moreover, the standard rent for a share is, as of the date of publication of this article, simply ridiculous. About $150 a year! And this despite the fact that the grain produced in Ukraine is massively sold abroad at world prices, and for foreign currency.
So now my friend's first priority is to collect the required number of shares to run an economically profitable business. Which is exactly what he is currently doing. Although this is not an easy task. After all, the shares that have already been leased have to be literally poached, while convincing and attracting the owners of these shares with more favorable lease terms. Often, even when obtaining consent from the owner to transfer a share, it is necessary to sue it from other competing renting firms. A friend is even ready, in case of transferring shares to him, to really and significantly increase the rent, but the truth is only on one condition: providing a Ukrainian agricultural producer with the opportunity to directly access free commodity markets (exchanges), as it has long been implemented, even for the small businesses throughout the civilized world.
Now, according to him, under the conditions for doing business long ago created by the authorities, businessmen are forced to sell their agricultural products to certain traders at relatively low prices. That is, in fact, instead of free access to the necessary resource - the commodity exchange, the business is faced with a situation of limited access in accordance with Fig. 2, where the ball is ruled by bogus, controlled by government officials, enterprises and firms - the so-called traders. It is they who, on the one hand, limit the profitability of the agricultural producer, and on the other hand, they provoke the same producer to pay meager rents to the owners of the shares.
But this, in fact, has already been written above in this article. Something else struck me. In the words uttered by a friend, my hearing resonated with the painfully familiar and close to all of us term “traders”!!! Here, it turns out, how it is perceived and what an undeservedly high word is called by our business, largely deprived of the right to be a real commercial trader, these scam companies covered by the authorities. They call them traders!!! While, in my opinion, the most appropriate definitions for them, I'm not afraid of these words, are such phrases as "price blackmailers" and "trade terrorists"!!)). They have the same attitude to real civilized trading, as, for example, I have to space!
Do we need such “traders”?

Instead of playing roulette, consider the game of the stock exchange, the relationship to which is twofold: some identify the game on the stock market with a game in a casino where players in pursuit of luck dominate; others call the stock market an efficient market because it is sensitive to changes in price information, instantly reacts to their modifications, promotes the rational redistribution of financial resources, while solving many problems associated with uncertainty"

Let's consider the mechanism of risk limitation in the ways typical for exchange markets. Uncertainty, as a property of the market economy, gives rise to speculation and arbitrage.

Speculation- a type of economic activity based on the use of price differences over time and involving the purchase of a product with the aim of reselling it over time at a higher price.

Arbitration- a kind of economic activity, the purpose of which is to make a profit by acquiring (purchasing) a product in one market and reselling it in another at a higher price. This activity is based on the use of price differences in space.

These two varieties are united by one concept - speculation, which involves a conscious risk for those involved in it (Fig. 14.7).

If a speculator buys and keeps a commodity with the aim of selling it over time at a higher price, then naturally he expects the price of this commodity to rise. If his expectations are justified, he will receive a speculative income.

Futures- this is an agreement in connection with the purchase or sale of goods or securities in the future at a price characteristic of a particular moment (today).

The mechanism for drawing up a futures agreement can be illustrated as follows. For example, a financial investor wants to buy Scania shares in anticipation of a price increase for the company in the future. He signs a purchase contract with an exchange intermediary

• 10,000 shares in a year at today's price, expecting the stock price to stay the same. Let's say that a company's share costs UAH 50, therefore, the contract value is UAH 500,000. If the price of one share in a year rises to UAH 60 per share, the investor will receive:
• 10 UAH 10 thousand pieces = 100 thousand UAH of profit.

If the price drops to UAH 40, then he will incur losses in the amount of UAH 100,000.

Option is an agreement whereby another party can buy or sell goods or securities over a specified period at an agreed price, which may be significantly lower or higher than the current price. An agreement to acquire (purchase) is called a call option (call), and to sell - a put (put).

A feature of this agreement is that the investor may or may not exercise his right to buy (sell) depending on the situation on the market. For example, if an investor wants to purchase Scania shares, expecting an increase in prices for them in the future and based on the current price of UAH 50 per share, then by signing an option contract for a period of 1 year to purchase 10,000 shares, in the event of a real increase in the share price from UAH 50 to UAH 60 per piece, he exercises his right to buy them at a price of UAH 50 per piece, and then to sell them at a price of UAH 60 per piece, and, ultimately, he exercises his right to receive a profit of UAH 100,000. UAH minus commission fee to the broker.

If the share price drops to UAH 45 or 40 per share, this agreement provides the investor with the right to refuse to buy 10,000 shares. His losses (losses) will be determined only by the amount of commissions paid to the broker.

The objects of sale and purchase in the options and futures markets can be not only securities, but also grain, cotton, sugar, etc. n. These markets are traded by speculators and hedgers. The division of futures market participants into speculators and hedgers is carried out on the basis of their goals.

Speculators- market participants who buy (sell) in order to sell (buy) the same product in the future, respectively, making a profit if their expectations regarding the direction of price change or exchange rate turn out to be justified. They deliberately take risks and hold an open position, having only assets (commodities) or only liabilities (securities) in their hands and expecting that at the end of the contract the situation will develop in their favor.

Consequently, speculators buy sugar, cotton, or other commodities not because they need them, but because they hope to earn a return by realizing risk. They agree to sell the sugar they don't have, or buy it, although they don't need it at all, carrying out these operations not with real goods, but with contracts. A futures exchange is therefore called a price market, as opposed to markets for real goods.

If a speculator expects in September that sugar prices will rise in April compared to the current futures price, then he will buy sugar (contract) in September, stipulating its delivery in April. If he expects the price in April to be lower than the current futures price, he will sell a contract obliging him to deliver sugar in April.

Hedger- a legal entity (company, bank, farmer, etc.), which, unlike a speculator, insures (hedges) possible losses due to changes in prices and exchange rates. He seeks to neutralize the risk, holds a closed position, having on hand balancing future assets and future liabilities.

The hedger is subject to more favorable tax treatment than the speculator. Bona fide hedgers are not affected by the limitation in relation to the number of signed exchange agreements. Hedgers are subject to preferential coverage of futures contracts with guaranteed deposits and a margin that is 25-30% less than for speculators.

Hedging- the actions of the buyer or seller aimed at protecting their income from the impact of price changes in the future. This is an insurance mechanism with the help of the exchange.

Hedging- a peculiar form of self-insurance, significantly reducing the risk and contributing to the achievement of the stability of the market economy. The hedging mechanism assumes that the buyer's losses are covered by the seller, and the seller's losses are covered by the buyer, respectively. This mechanism allows you to avoid loss of profit from changes in exchange rates, price fluctuations, etc.

Hedging- this is the possession of a certain commodity (long position) and at the same time the sale of a contract (short position) in the futures or options market or the purchase of a futures before a certain commodity is bought in the market. Entering the futures market, the seller holds a short position, and the buyer holds a long position.

Both the buyer and the seller have the opportunity to liquidate their position at any time. To do this, each of them needs to perform an action opposite to the original position. That is, the one who held a short position (seller) buys futures, and the one who has a long position (buyer) sells futures. Thus, the insurance protection of market participants is carried out.

For example, let a rubber manufacturer supply (sell) it to a tire plant in the amount of 100,000 tons per year at a price of UAH 500 per 1 ton. But the manufacturer (hedger) expects an increase in the price of fillers needed to produce rubber, which he buys from another manufacturer. In order to insure himself against rising prices for fillers, he signs an agreement with their manufacturer for a certain period to purchase the required number of fillers after a period specified in the agreement (in a year) at today's price. This means that the rubber manufacturer is hedged (self-insured). If the filler chain increases, the rubber manufacturer will, by agreement, receive a certain amount to cover his increased rubber production costs.

If the price of fillers decreases, then the rubber manufacturer who signed this agreement will incur losses that will be covered by a larger profit from the sale of rubber. The rubber manufacturer will not lose anything either in the first or in the second case, although it will not gain anything. He does not speculate. Its purpose is insurance.

As the example shows, hedging helps to reduce the risk from an unfavorable price change, but at the same time does not provide an opportunity to take advantage of favorable price changes.

To understand the role of speculators and hedgers, it is necessary to know how the expectations of both affect the price level in the exchange markets. We have seen that while expecting an increase in the current futures (option) price in the future, both speculators and hedgers will buy contracts (agreements) for goods on the spurt to supply them in the future. If the expectations of many speculators and hedgers coincide, then demand will increase in the futures markets and prices will increase accordingly.

If the expectations of many are directed towards lowering the price in the future, they will accordingly begin to sell contracts in the futures markets, which will lead to an increase in supply and a decrease in price. Therefore, the futures price is a market forecast of future prices.

Is the market forecast always reliable enough?

On the one hand, futures prices deviate significantly from actual prices. On the other hand, futures prices on average correspond to the forecasted ones, but there are also serious variative fluctuations of the average value up and down. This situation does not contradict the theory of efficient markets, according to which one cannot make money in the market, hoping only that the actual prices will be systematically higher or lower than the futures. In this way, speculators help ensure that futures prices inform in some way about the level of actual prices in the future (Figure 14.8).

Speculative activity can be legal or illegal. Illegal speculation destabilizes the economy. legal speculation, carried out within the legally defined framework, contributes to more or less accurate price forecasting in futures markets, provides market participants with reliable information, contributes to the preservation of scarce resources and their rational redistribution, and performs a stabilizing function.