What are futures markets?

Futures markets are also called futures exchanges. Traders use futures exchanges to hedge against price volatility and speculate on the future prices of stock indexes, currencies, commodities, interest rates and other assets. A futures contract is a contract to exchange a particular security at a specific price on a specific future date.

What is a 'long' and'short' in a futures market?

In a futures market, we call the purchaser and seller of a contract the ‘ long’ and the ‘ short ‘ respectively. Regulatory agencies across the world monitor the activities within futures exchanges. In the United States, the regulator is the CFTC. CFTC stands for the Commodity Futures Trading Commission.

What is a futures contract?

Futures contracts are made in an attempt by producers and suppliers of commodities to avoid market volatility. These producers and suppliers negotiate contracts with an investor who agrees to take on both the risk and reward of a volatile market.

When did futures hedging start?

The emergence of interest rate, or bond futures, and currency futures in major foreign exchange markets came in the 1970s. Today's futures exchanges are significantly larger, with hedging of financial instruments via futures. These futures hedging contracts comprise the majority of the futures market activity.