What is a futures contract?

Futures contracts are financial derivatives that oblige the buyer to purchase some underlying asset (or the seller to sell that asset) at a predetermined future price and date. A futures contract allows an investor to speculate on the direction of a security, commodity, or financial instrument, either long or short, using leverage.

What is the difference between a long and a short futures contract?

Long means that the party agrees to buy the underlying asset in the future at a specific price, while short means the party agrees to sell the underlying asset at a specific price upon the contract’s expiration in the future. Futures contracts are traded on regulated exchanges and are regulated by the Commodity Futures Trading Commission (CFTC).

How do BTC futures work?

A single BTC contract has a value of five times the value of the BRR Index and is quoted in U.S. dollars per one bitcoin. The tick increments are quoted in multiples of $5 per bitcoin, meaning a one-tick move of the BTC future is equal to $25. BTC futures are block trade eligible with a minimum quantity threshold of five contracts.

Is a futures contract a derivative?

The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative .