P2P Trading
P2P Trading stands for Person-to-Persion trading. In P2P Trading, the person who purchase the Asset becomes the owner of the Asset and the purchaser can do whatever he wants to do i.e he can sale or transfer the Asset.
Example
When you purchase BCH from exchange in P2P mode, then you becomes owner of the BCH and you can sale or transfer BCH.
Note :- Exchange may impose some ristriction like Minimum withdrawal, Minimum Trade ammount etc.
Margin Trading
Note:- In this article I have explained only Future contracts only. I will explain Option contract in upcoming article. I have used Foreign Exchange to explain logic. ( Same logic is applicable for Equity and Cryptocurrency also )
Future Contract
A currency 'Future' contract is a contract to buy or sell on the 'Exchange' a standard quantity of foreign currency at a future date at the price agreed to between the parties to the contract.
Some key features of Future contracts.
(i) Future contracts are settled in cash. ( Every country have its own policy, so some country may allow delivery but normally Future contracts are settled in cash.)
( This is the reason, when you trade in margin mode, you can't withdraw or transfer.)
(ii) Mark-to-Market is one of the important feature of the Future contracts, under this, the price of the Future contracts are marked to the market on daily basis. Profit/Loss are calculated on the basis of closing price of the Asset
(iii) Future contracts are standardized in terms of currency ammount.
Example
Mr. "X" enters into 1 contract of purchase future of '£ ' on 06/Aug/2020 at a price of 1£=1.80$. The standard size of 1 Future contract is 1,00,000£ and initial margin is 5,000$ per contract.
Suppose closing prices are on
06/Aug/2020 1£=1.78$
07/Aug/2020 1£=1.82$
and Mr. 'X' close his position on 08/Aug/2020 when price is 1£=1.85$.
Here, standard size is 1,00,000£, therefore you can't Contract to purchase or sale other amount i.e you can contract for 1,00,000£ only.
Initial margin is 5,000$, it means you have to deposit 5,000$ first and any profit or loss will be adjusted to 5,000$ initial deposit.
On ,06/Aug/2020
First Step
First you have to deposit 5,000$ and contracts to purchase 1,00,000£.
Second Step
At the time of closing, original contract is cancelled by opposite contract for same ammount. i.e sale contract of 1,00,000£.
Purchase (Original contract). 1.80$/£
Sale ( Opposite contract). 1.78$/£
Loss 0.02$/£
Loss on contract (0.02X1,00,000) 2,000$
New margin balance (5,000-2,000) 3,000$.
Third step
Open new contract at closing price i.e purchase contract at 1£=1.78$.
On 07/Aug/2020
First step
At the time of closing previous contract (1£=1.78$) cancelled by opposite contract.
Purchase ( Previous contract) 1.78$/£
Sale ( opposite contract). 1.82$/£
Profit. 0.04$/£
Profit on contract (0.04X1,00,000) 4,000$
New Margin balance (3,000+4,000) 7,000$.
Second Step.
Open new contract at 1£=1.82$.
On 08/Aug/2020
Contract is closed at 1£=1.85$
Purchase ( Previous contract) 1.82$/£
Sale Contract ( Closing Contract) 1.85$/£
Profit 0.03$/£
Profit on contract (0.03X1,00,000) 3,000$
Final margin balance (7,000+3,000)
Final margin balance is your balance.
Here you observed that, there is no actual purchase/sale of '£'.
You purchased "contract" and sold "contract".
Therefore you can't withdraw or transfer Assets purchased in margin mode.
I have explained only general aspects only, if you have any questions, you may ask questions by comments or you know any other way. I am new at read.cash so I don't know portal very much.
Thank you for reading.
