#SPOT vs #FUTURES about NATURE:
1. Nature of the transaction:
- Spot trading involves buying or selling an asset immediately at the current market price. When you make a spots transaction, you will own or transfer ownership of the property immediately.
Futures trading is an agreement to buy or sell an asset at a specified price at a future date. You do not own the asset when you sign a futures contract.
2. Purpose of use:
- Spot transactions are often used for direct investment or immediate consumption purposes.
Futures trading is often used for speculative or hedging purposes, allowing investors to protect against future price fluctuations.
3. Risk and profit:
- Spot trading has lower risk than futures because it does not involve uncertain factors of the future.
- Futures trading can bring higher profits due to the use of financial leverage but also comes with higher risks.
4. Financial leverage:
- Trading spots rarely allows the use of leverage.
- Futures trading is often done with leverage, allowing investors to control a large amount of assets with a small amount of capital.
5. Liquidity:
- Trade spots with varying liquidity depending on the asset and market.
- Futures trading often has high liquidity due to standardization and trading on major exchanges.
👉 Depending on your goals and investment strategy, choose the appropriate form.
DYOR!!!