What are futures?

What are 'Futures'. Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on...

Can you trade futures for profit?

Futures contracts can be traded purely for profit, as long as the trade is closed before expiration. Many futures contracts expire on the third Friday of the month, but contracts do vary so check the contract specifications of any and all contracts before trading them.

What types of assets can you trade with futures contracts?

There is no limit to the type of assets that investors can trade using these contracts. As such, they can trade the following futures: stocks, bonds, commodities (energy, grains, forestry, livestock, and agricultural products), currencies, interest rates, precious metals, and cryptocurrencies, among others.

How do investors use futures contracts?

Investors can use futures contracts to speculate on the direction in the price of an underlying asset. Companies can hedge the price of their raw materials or products they sell to protect from adverse price movements. Futures contracts may only require a deposit of a fraction of the contract amount with a broker.