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Futures

Meaning:

Futures are defined as standardized financial contracts where two parties agree to buy or sell an asset at a fixed price on a specified future date. They are traded on exchanges such as NSE, BSE, and MCX. In simpler terms, futures allow you to lock in a price today for something you will buy or sell later.

Example:

For example, if you buy a Nifty Futures contract at ₹15,000, you are agreeing to  buy or sell the Nifty index at that price on a future date.


How to understand futures:

Futures help investors and businesses protect themselves from price fluctuations.
They provide high liquidity, meaning it’s easy to buy and sell them.


Importance of Futures:

Futures play a role in stabilizing markets by reducing volatility and helping in price discovery.