I have been reading news on crypto-currencies. As a developer, I understand well how Bitcoin works. I also have a basic understanding of finance in general and stocks in particular.
I understand how futures contracts work. I read some resources about it. One buyer and one seller agree to make a trade on a specified date a pre-defined amount of goods for a certain amount of money.
I read that BTC futures contracts (backing 5 BTC) are cash-settled, i.e., there is no BTC behind each contract. Hence, 1 contract doesn't imply keeping 5 BTC. Okay, so there is only a bet between two people, and at the end of the contract (June 17), the winner gains the delta price from the loser of the contract.
Here come my troubles. I checked the data from the the Chicago Board Options Exchange (CBOE) and I don't see expected price between "betters" for the end of the contracts. I only see a normal current price of futures contracts.
How do I know on what price each futures contract is configured? (The X in "Trader A: I bet that BTC will be worth X on 17 January, do you take the bet?)
Why exchanging futures? Why selling a futures contract? And why buying a futures contract?
Why is the current futures price not the mirrored price of a BTC?
I see there are 3300+ futures created. How are they created? When there is a match between a trader who wants to bet that BTC will be worth less than $Y and another who wants to bet that BTC will be worth more than $X?
When I buy a $17,800 futures contract, who gets the money? Because I guess I'm not betting against CBOE?
And so on. I have also other questions but from those you must know what I missed in understanding futures contracts. Thank you a lot.
Thank you all, it is clearer now, but:
I understand that a contract is created when guy A bet that BTC will be worth less than $X and guy B bet it will be worth more than $X. Clear. Each predefined time period, when the price fluctuate, a margin call is made and, let's say BTC price is $X-10, B gives $10 to A.
Hmmm, at this point, B decide to sell the future to guy C at $X. So now, when a margin call is made, if BTC price is $X - 20 then, C gives $20 to B. But ... what exactly happens to A ? The thing I don't understand is that a future is made between two guys, but selling / buy involves the fact that one guy is owning the contract. But no ones really owns the contract, it is a agreement between two parties, so how could one sell it .. ?