Futures contracts — what they are and how they work in Poland
What are futures contracts? How do they work, what are they used for and what risks do they carry — simplified explanation.
What is a futures contract?
A futures contract is an agreement between two parties to buy or sell a specific asset in the future at a predetermined price. It's standardized and traded on an exchange.
Unlike options — futures obligate both parties to execute the transaction.
How do futures work?
Mechanism
- Buyer (long) commits to buying the asset at a specified time
- Seller (short) commits to selling
- Price is set at the time of contract conclusion
- In practice, most contracts are closed before expiration (cash settlement)
Margin deposit
You don't need to pay the full contract value. A deposit is sufficient — usually 5–15% of value. This creates financial leverage.
Example: WIG20 contract worth 50,000 PLN requires deposit of ~5,000 PLN. Leverage 1:10.
What are futures contracts for?
Popular underlying instruments
- Stock indices — WIG20, S&P 500, DAX
- Currencies — EUR/USD, USD/PLN
- Commodities — oil, gold, wheat
- Bonds — e.g., US Treasury futures
- Cryptocurrencies — BTC, ETH (on CME)
Who uses futures?
- Hedgers — companies hedging against price changes (e.g., airlines hedge fuel prices)
- Speculators — profit from price changes, accepting risk
- Arbitrageurs — exploit price differences between markets
Risk
- Leverage — losses can exceed the deposited margin
- Margin call — if deposit falls below minimum, broker requires additional payment
- Liquidity — some contracts have low liquidity
- Rolling — need to close expiring contract and open new one (contango costs)
Futures vs options
| Feature | Futures | Options |
|---|---|---|
| Obligation to execute | Yes (both parties) | Only seller |
| Deposit | Required | Buyer pays premium |
| Loss risk | Unlimited | Buyer: max premium |
| Leverage | High | High |
Futures on GPW (Warsaw Stock Exchange)
The Warsaw Stock Exchange offers contracts on:
- WIG20 index
- Selected stocks (KGHM, PKO BP, PKN Orlen)
- Currencies (USD/PLN, EUR/PLN)
How Freenance can help
Freenance allows you to include futures contract positions in your complete portfolio picture, tracking exposure and leverage impact on your finances.
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