Futures

What are futures?

A future is a standardized contract to buy or sell a specified asset at a specified price at a future date. Futures contracts are traded on an exchange.

How are futures traded?

Futures contracts are traded on an exchange. Traders can buy and sell futures contracts through a broker. The price of a futures contract is based on the price of the underlying asset.

What is the difference between a future and a forward?

A future is a standardized contract to buy or sell a specified asset at a specified price at a future date. A forward is a non-standardized contract to buy or sell an asset at a specified price at a future date.

What is the difference between a future and an option?

A future is a contract to buy or sell an asset at a specified price at a future date. An option is a contract that gives the holder the right, but not the obligation, to buy or sell an asset at a specified price at a future date.

What are the benefits of trading futures?

Futures contracts are traded on an exchange. This provides transparency and price discovery. Futures contracts are standardized, which makes them easy to trade. And, because they are traded on an exchange, they are regulated.

What are the risks of trading futures?

The risks of trading futures contracts include the risk of loss and the risk of counterparty default. The risk of loss is the risk that the price of the underlying asset will move in the wrong direction. The risk of counterparty default is the risk that the other party to the contract will not fulfill their obligations.

What are the different types of futures contracts?

Futures contracts can be traded on a variety of underlying assets, including commodities, currencies, stocks, and indexes. The most popular types of futures contracts are commodities contracts, such as oil and gold, and currency contracts, such as the Euro/Dollar contract.

What are the different types of futures markets?

The two main types of futures markets are the commodity markets and the financial markets. The commodity markets include the markets for agricultural products, such as wheat and corn, and for energy products, such as oil and natural gas. The financial markets include the markets for stock indexes, such as the S&P 500, and for interest rates, such as the 10-year Treasury note.

What factors affect the price of a future?

The price of a future is based on the price of the underlying asset. The most important factor that affects the price of a future is the price of the underlying asset. Other factors that can affect the price of a future include the level of supply and demand, the level of inventories, and the weather.

How can I hedge with futures?

Hedging is a risk management technique that involves taking offsetting positions in different markets to minimize the risk of loss. For example, a farmer might hedge against the risk of a decline in the price of wheat by buying a wheat futures contract. And, an investor might hedge against the risk of a decline in the stock market by buying a stock index futures contract.

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