The future is a contract that deals with the future, as its name implies. Futures are a regular, legal contract in the financial world. It is a contract to purchase or sell an underlying asset at a defined price at a future date that has been agreed upon. Usually, this transaction takes place between strangers. Futures are distinct from forwards because they are standardized exchange-traded products, whereas forwards are individualized OTC products. All futures contracts on the NSE and BSE carry the clearing corporation’s counter-guarantee.
Numerous different financial and commodity-based futures contracts can be traded, ranging from indices, currencies, and debt to energy, metals, and agricultural items. The following are some examples of futures contracts:
Financial Prospects
Financial futures come in index contracts and interest rate (debt) contracts. While interest rate contracts are used to expose investors to the interest rate of a specific debt instrument, index contracts offer exposure to particular market index values.
Currency Futures
Currency futures are one of the numerous types of financial futures. This futures contract enables you to purchase or sell currency at a predetermined rate concerning another currency (such as the euro against the dollar, for example) at a future date. Speculators and those looking to hedge risks both employ this. For instance, an Indian importer would buy USD futures to hedge against currency rises versus the rupee.
Commodity Futures
Hedging against future price changes in various commodities, such as agricultural products, gold, silver, petroleum, etc., is possible via commodity futures. Gamblers also use them to wager on price changes. Since currency markets are unpredictable, significant institutional participants like governments and private enterprises usually dominate them. In addition, commodities have low beginning margins, allowing participants in commodity futures to build large bets.
Equities futures
A trader can wager on a stock’s future value through the use of stock futures even though they do not really own the asset. The futures investor makes money if the stock’s value rises. Conversely, if the stock’s value drops, the investor in the future suffers a loss. With futures, you can establish a contract that will be fulfilled at a future time specified in the contract.
VIX Futures
You can wager on whether market volatility will increase or decrease using the VIX index, which measures volatility. The direction of the market is unrelated to it. The Fear Index, or VIX, is a gauge of investor angst. Sharp market corrections typically coincide with a spike in the VIX.
OVERVIEW
The future is a contract that deals with the future, as its name implies. Futures are a regular, legal contract in the financial world. It is a contract to acquire or sell an underlying asset at a defined price at a future date that has been agreed upon. Usually, this transaction takes place between strangers. Futures are distinct from forwards in that they are standardized exchange-traded products, whereas forwards are individualized OTC products. All futures contracts on the NSE and BSE carry the clearing corporation’s counter-guarantee.
