Futures

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Futures

Meaning:

Futures are defined as standardized financial contracts where two parties agree to buy or sell an underlying asset at a fixed price on a specified future date. These contracts are actively traded on exchanges such as the NSE, BSE, and MCX. Futures contracts enable participants to lock in the price of an asset today for a transaction that will occur in the future.

Example:

For instance, if an investor purchases a Gold Futures contract at ₹50,000 per kilogram, they are agreeing to buy or sell that gold at that price on the contract’s expiration

date.

How to understand futures:

Futures contracts are instrumental in helping investors and businesses mitigate risks associated with price volatility, thereby enhancing financial stability.

They provide a platform for speculation, allowing traders to capitalize on anticipated price movements in various asset classes.

Importance of Futures:

Futures contribute to economic stability by reducing market volatility and facilitating price discovery, which is crucial for forecasting future trends.

Types of Futures:

Index Futures: Based on stock indices like Nifty, Bank Nifty, and Sensex.

Stock Futures: Based on individual shares such as Reliance, TCS, and HDFC Bank.

Commodity Futures: Covering assets like gold, silver, crude oil, and agricultural products.

Currency Futures: Trading currency pairs like USD/INR and EUR/INR.

Interest Rate Futures: Based on government bonds or interest rate benchmarks.

Forex Futures: Used for trading and hedging currency pairs globally.

How Futures Are Evolving:

Technological advancements have made futures trading faster and fully digital, enhancing accessibility for traders.

There are more advanced risk-management tools available for retail investors, making futures trading safer.

The introduction of weekly expiries and flexible contract sizes allows for greater flexibility in trading.

Increased participation from both retail and institutional investors is expanding the futures market.

Globalization has led to the expansion of futures into newer asset classes, diversifying trading opportunities.

Algorithmic trading and automated systems are becoming dominant in futures trading, driving volume and efficiency.

Exchanges are employing AI-based surveillance to ensure safer trading environments.

More mini contracts are being introduced to make futures trading more affordable for individual investors.

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Disclaimer

< Back

Futures

Meaning:

For instance, if an investor purchases a Gold Futures contract at ₹50,000 per kilogram, they are agreeing to buy or sell that gold at that price on the contract’s expiration date.

How to understand futures:

Futures contracts are instrumental in helping investors and businesses mitigate risks associated with price volatility, thereby enhancing financial stability. They provide a platform for speculation, allowing traders to capitalize on anticipated price movements in various asset classes.

Importance of Futures:

Futures contribute to economic stability by reducing market volatility and facilitating price discovery, which is crucial for forecasting future trends.

Types of Futures:

How Futures Are Evolving:

For instance, if an investor purchases a Gold Futures contract at ₹50,000 per kilogram, they are agreeing to buy or sell that gold at that price on the contract’s expiration

date.

Futures contracts are instrumental in helping investors and businesses mitigate risks associated with price volatility, thereby enhancing financial stability.

They provide a platform for speculation, allowing traders to capitalize on anticipated price movements in various asset classes.