Futures

What are futures?

Futures are financial contracts obligating the buyer to purchase, or the seller to sell, an asset at a predetermined future date and price. Futures are commonly used for commodities, financial instruments, and other assets.

What is Futures Trading?

Futures trading involves buying and selling futures contracts in a financial market. Traders enter into these contracts to hedge against price fluctuations or to speculate on the direction of future prices. In India, futures trading is typically done on exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

What is a Futures Contract?

A futures contract is a standardized agreement to buy or sell a specific quantity of an asset, such as commodities, stocks, or currencies, at a set price on a future date. These contracts are traded on futures exchanges and come with specific terms, including the asset type, quantity, delivery date, and price.

How to Trade in Futures

1. Open an Account: Start by opening a trading account with a broker who offers futures trading.
2. Understand the Market: Research the assets you want to trade and understand market trends and factors influencing prices.
3. Choose a Contract: Select a futures contract that aligns with your trading strategy or investment goals.
4. Place an Order: Enter your buy or sell order for the futures contract through your trading platform.
5. Monitor and Manage: Track the performance of your contracts and adjust your positions as needed to manage risk and maximize returns.

What is the Difference Between Futures and Options?

• Futures Contracts: Obligate the buyer to purchase and the seller to sell the asset at the contract's expiration. Both parties must fulfill the contract, regardless of market conditions.

• Options Contracts: Provide the buyer with the right, but not the obligation, to buy (call option) or sell (put option) the asset at a specified price before or at the contract's expiration. The seller of the option has the obligation to fulfill the contract if the buyer chooses to exercise the option.