For investors engaged in futures trading, there are mainly brokerage risks; Liquidity risk; The risk of forced liquidation; Delivery risk; Market risk.
1. Brokerage entrustment risk. That is, the risks arising from the futures brokerage company's selection of customers and the establishment of entrustment.
When choosing a futures brokerage company, the customer shall make a comparative selection of the scale, credit standing and operating conditions of the futures brokerage company, and sign a futures brokerage commission contract with the company after determining the best choice.
For example, in the early 1990s, the early system of the futures market was not perfect, and investors' legal awareness and self-protection awareness were not strong. A typical example is that customers of Nanjin Zhongfu Futures Company sued the company for fraud.
Therefore, when investors are preparing to enter the futures market, they must make careful investigations, make careful decisions, and choose companies with strength and credibility. It is very important to sign a futures brokerage commission contract with the company, and you must not rush into the market just by gentleman's agreement.
2. Liquidity risk. That is, due to poor market liquidity, it is difficult to conduct fast, timely and convenient transactions in futures trading.
This kind of risk is particularly prominent when customers open positions and level positions. For example, when opening a position, it is difficult for traders to enter the market at the ideal time and price, and it is difficult to operate as expected, and the hedger cannot establish the best hedging portfolio; When closing positions, it is difficult to close positions through hedging, especially when futures prices show a continuous unilateral trend, or near delivery, which reduces market liquidity, making traders unable to close positions in time and causing heavy losses.
For example, on a certain day in September 2000, when the copper price was 19700 yuan/ton, a customer planned to short 5 lots (25 tons) of copper. However, because the market is generally worried that the copper price is too high, it is difficult for customers to realize their investment plans. Similarly, when there is a big market, sometimes futures prices will run continuously in one direction, which makes it difficult to close positions. These are all caused by liquidity risk.
Therefore, in order to avoid liquidity risk, it is important for customers to pay attention to market capacity, study the main composition of long and short sides, and avoid entering the unilateral market dominated by unilateral strength.
3. The risk of forced liquidation. Futures trading shall be carried out by futures exchanges and futures brokerage companies on a daily basis. In the settlement stage, because the company has to settle the traders' profits and losses according to the settlement results provided by the exchange every day, when the futures price fluctuates greatly and the margin cannot be replenished within the specified time, the traders may face the risk of being forced to close their positions.
In addition to the forced liquidation caused by insufficient margin, when the total position of the securities firm entrusted by the customer exceeds a certain limit, it will also lead to the forced liquidation of the securities firm, which will further affect the forced liquidation of the customer.
Therefore, when trading, customers should always pay attention to their financial situation to prevent forced liquidation due to insufficient margin and bring huge losses to themselves.
4. Delivery risk. Futures contracts are time-limited. When the contract expires, all open contracts must be delivered in kind. Therefore, customers who are not ready for delivery should close their positions in time before the contract expires, so as not to bear the delivery responsibility.
This is a special point of the futures market compared with other investment markets. New investors should pay special attention to this link and try not to hold the contract in their hands until it is close to delivery, so as not to fall into the predicament of being forced to close the position.
5. Market risk. In futures trading, the biggest risk for customers comes from the fluctuation of market prices. This price fluctuation brings the risk of trading profit and loss to customers. Because of the leverage principle, this kind of risk is magnified, and investors should always pay attention to prevention.