What are Futures

Futures trading is a type of financial derivative trading in which traders buy and sell futures contracts. A futures contract is a standardized agreement to buy or sell a particular asset at a predetermined price at a specified time in the future. The asset underlying the futures contract can be a physical commodity, such as agricultural products, metals, or energy, or it can be a financial instrument, such as a currency or an index.

Futures contracts are traded on futures exchanges, which are specialized marketplaces where buyers and sellers can buy and sell futures contracts. These exchanges act as intermediaries and provide a centralized location for traders to buy and sell futures contracts.

Futures contracts have a number of features that make them different from other financial instruments. For example, they are standardized, meaning that the terms of the contract, such as the underlying asset, the delivery date, and the contract size, are predetermined and not subject to negotiation. They are also highly leveraged, meaning that traders can take on large positions with relatively small amounts of capital.

Traders use futures contracts for a variety of purposes, such as hedging against price movements in the underlying asset, speculating on price movements, or arbitrage (profiting from price discrepancies between different markets). However, trading futures carries a high level of risk due to the leverage and the potential for significant price movements, and it is not suitable for all investors.