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Futures

Meaning:

Futures are standardized financial contracts in which two parties agree to buy or sell an asset at a predetermined price on a specified future date. These contracts are traded on exchanges like NSE, BSE, and MCX. In essence, futures allow market participants to lock in today’s price for a transaction that will occur in the future.

Example:

For instance, if a trader buys a Crude Oil Futures contract at ₹4,000 per barrel, they  agree to sell or buy that oil at that price on a future date.


How to understand futures:

Futures are vital for hedging against risks associated with price changes, providing a safety net for investors and businesses.
They allow traders to speculate on market movements, profiting from changes in asset prices.


Uses of Futures:

Futures are used for hedging, speculation, and arbitrage, among other financial strategies.