Futures Contracts in Vietnam: From Theory to Practice

2025-12-26 10:46:41

What Are Futures Contracts and Why Have They Become an Essential Investment Tool for Vietnamese Investors? Since the Vietnam Stock Exchange (HOSE) launched the VN30 index futures contract in 2018, this field has gradually become a choice for investors seeking diversified profit opportunities. Although futures contracts have existed worldwide for a long time, in Vietnam, they remain a relatively new tool, especially for retail investors.

Origin and Purpose of Futures Contracts

Futures contracts originated from the practical needs of trading companies. Specifically, airlines need to purchase fuel continuously but face unpredictable oil price fluctuations. To protect themselves against sudden price increases, they sign futures contracts with suppliers, locking in the current price for future delivery. This model was then widely applied to many assets: rice, gold, crude oil, securities, cryptocurrencies, and other instruments.

How It Works: Long and Short Positions

Futures contracts in Vietnam operate on two basic positions:

Long Position (Long): You agree to buy the asset at an agreed price upon contract expiration. If the actual price is higher, you profit; if lower, you incur a loss.

Short Position (Short): You agree to sell the asset at an agreed price upon contract expiration. If the price decreases, you profit; if it increases, you incur a loss.

Let’s look at a specific example with Brent oil (UKOIL):

Asset: Brent oil
Expiration date: 10/31/2020
Volume: 1000 Barrels
Contract price: $43/Barrel

If you predict the price will rise and open a Long position, then the price increases to $44 on 10/20/2020, you can sell the contract and earn a profit of $1,000.

Conversely, if you Short and the price drops to $42, you buy back the contract before expiration at a lower price, gaining $1,000.

Unique Features of Futures Contracts in Vietnam

Standardization: Each futures contract in Vietnam is fully standardized regarding traded assets, volume, price levels, and expiration date. This ensures transparency and easy comparison.

Official Listing: Futures contracts are listed on the derivatives exchange, guaranteed by regulatory authorities, reducing default risk from counterparties.

Margin Requirements: To protect both parties, investors must deposit an initial margin (margin). Daily profit and loss are settled based on market prices. If the account falls below the minimum margin, a margin call will be issued.

Leverage: This is the most attractive factor. You only need to deposit a small part of the contract value (for example 5-10%) to trade the entire value. This can increase profits by 4-5 times compared to actual price movements but also amplifies potential losses.

Hidden Risks

Leverage Risk: Using 1:10 leverage and a 5% price movement against your prediction, you could lose 50% of your margin. The higher the leverage, the greater the risk.

Daily Settlement: Profits and losses are settled daily. If the market moves strongly against your position, you must recognize the loss immediately. Insufficient margin can lead to forced liquidation.

Speculation Risk: Futures do not generate intrinsic value (unlike stocks with dividends or bonds with interest). Prices fluctuate solely based on market sentiment. With easy open/close positions, it becomes a dangerous speculative tool for undisciplined investors.

Vietnam Futures vs CFD: Which to Choose?

CFD (Contract For Difference) is also a derivative instrument allowing trading of assets like gold, stocks, forex, bitcoin without actual ownership. Here is a detailed comparison:

Criterion	CFD	Futures Contract
Trading Venue	OTC market (informal)	Regulated derivatives exchange
Leverage	High (1:100+)	High (1:10 - 1:20)
Expiration Date	None	Yes
Contract Size	Flexible from small to large	Usually large scale
Fees	Overnight fees, Bid-Ask spread	Brokerage fees, management fees

Advantages of CFD:

Very high leverage, requiring less capital
Flexible long and short trading
No expiration date restrictions
Small contract sizes suitable for small capital

Disadvantages of CFD:

High speculation risk, quick total loss
Not officially listed, default risk of broker
Requires 24/7 market monitoring

Advantages of Futures:

Officially listed, guaranteed by stock exchange
Provides real risk hedging for businesses
Large scale, suitable for institutional investors

Disadvantages of Futures:

High initial capital requirement
Contracts have fixed durations, need accurate predictions within time frame
Must pay management and brokerage fees to third parties

Choosing the Right Instrument

If you are a Vietnamese retail investor with limited capital, willing to accept high risk and short-term trading, CFD is a more flexible option.

Conversely, if you are a large organization or an investor intending to buy/sell commodities or securities for real purposes and want risk protection, futures contracts in Vietnam are the official, safer, and more effective tool.

Conclusion

Futures contracts in Vietnam are no longer unfamiliar tools. With the development of the derivatives market, more investors recognize their value—both as risk management tools for businesses and as profit opportunities for seasoned traders. However, success does not come from the instrument itself but from your knowledge, discipline, and risk management skills. Study carefully, start small, and never forget that leverage is a double-edged sword.

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