What are futures?

What are 'Futures'. Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on...

How do investors trade futures?

Investors can trade futures to speculate or hedge on the price direction of a security, commodity, or financial instrument. To do this, traders purchase a futures contract, which is a legal agreement to buy or sell an asset at a predetermined price at a specified time in the future.

What is the difference between stock and futures trading?

The contract lasts only for a particular time period and has an expiration date, unlike other financial instruments. When you buy a stock, it represents equity in a company and can be held for a long time, whereas futures contracts have a fixed time period. This is why the market direction and timing are vital while considering futures trading.

What is wrapping up futures trading?

Wrapping Up Futures trading is a contract between a buyer looking to invest and a seller and where the contract is made for the future and has an expiration date. There are two participants- Hedgers and Speculators. Hedgers protect their assets from risks and speculators are usually floor traders.