The Features Of Futures Market


Here are some of the most interesting things about futures contracts: Let’s start off by saying that the Indian derivative market is the largest in the world in terms of turnover and market participation! Before we get on to understanding more about the Futures market, we wanted to inform you that as an online trading company we offer lowest brokerage for intraday trading for our customers A futures contract can be used for exchanges, commodities, currencies, and indices. It can also be used for many different types of asset classes. A futures contract is not flexible like a forward contract. For example, if a contract says it applies to 1000 barrels of oil, the price must be locked in per barrel or in multiples of 1000 barrels. To lock in a price, someone would have to sell or buy a hundred different contracts. To lock in the price of a million barrels of oil, you would have to buy or sell a thousand of these contracts. Traders also get a good idea of what the futures price of a stock or the value of its index is likely to be. Future contracts are mostly used to figure out how many shares will be bought and sold in the future based on their current future price. Futures are traded on margin, which means that people who don't have enough money can still trade and take part. To do this, one can pay a smaller margin instead of the full value of the physical holdings. There are two types of people who use future contracts: speculators and hedgers. Producers or hedgers are the people who make or buy an underlying asset hedge. The price at which the good will be bought or sold is also guaranteed by these people. On the other hand, speculators are people who use futures to bet on how the price of the underlying asset will change. Futures Contract Example Here's an example of a futures contract to help you get a better idea of what it is: Let's say that a person who makes oil wants to sell it but worries that oil prices will go down in the future. A futures contract can be used to make sure that the oil producer gets a set price and doesn't lose money. With the help of future contracts, the oil producer can lock in the price at which the oil will sell, and once the future contract is up, the oil will be sent to the buyer. On the other hand, a company that makes things might need oil to make widgets. Since this company plans ahead and likes to get oil every month, they may also use a future contract. So, based on the price set in their future contract, the company knows how much oil they will get. They know that once their contract is up, they will have to take delivery of that oil. Conclusion Futures contracts are a great way to spread out your investments and make sure you make good money by using what you know and making guesses about future prices. Since you can trade Futures based on many different types of underlying assets, you can use a futures contract to protect yourself from losses in other asset classes and take delivery of the underlying asset before the contract expires. As an online trading company we offer lowest brokerage for intraday trading for our customers. Want to know more? Get in touch with us.