Ace Trades | What Is the Difference Between Trading stocks and futures?
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What Is the Difference Between Trading stocks and futures?

What Is the Difference Between Trading stocks and futures?

As a trader, both stocks and futures can be traded electronically through platforms. In both stocks and futures, the trader is speculating on a price.

The main difference is that when trading stock, a trader is actually buying shares, or equity in a company or they are selling shares of a company by borrowing the shares first from someone else. There are only a certain number of outstanding shares of that company.

In futures, the trader is either buying or selling a derivative product ex. (Gold, Oil, Pork) The trader does not actually own any shares of the underlying asset. The trader owns a contract which can be converted into physical delivery of a product at expiry t. In the case of oil, barrels of oil. In most cases traders are day trading and simply trying to make profits on fluctuations in the price of the futures contracts and no delivery is ever taken.

Stocks have no expiry, while futures contracts have expiry dates. As a trader this simply means you are usually trading the futures contracts with the closest expiry to the current date.

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