What is Futures Trading?

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What is futures trading?
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Introduction

• Investors opt for futures trading to hedge
  investments and buy them at a predetermined price
  at an already decided specific date. According to
  the futures contract, the buyer must buy, and the
  seller must sell before the expiration date.
• We will further understand what is futures
  trading.

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What is a futures contract?

• The futures contract is a financial product that
  involves derivatives trading. A derivative is a
  financial contract whose value is determined
  basis the value of the underlying asset.
• As mentioned earlier future contracts are similar
  financial products which are contracts made
  between buyer ad seller where the buyer buys the
  derivative at the fixed price.
• Eventually, the contract price fluctuates
  relative to the fixed price of the trade and thus
  profit or loss is generated.

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What is futures trading

• Future trading involves obligation which makes it
  mandatory for the buyer and seller to abide by
  the agreement and complete the trade on a
  predetermined date and price. The predetermined
  time I futures trading is called delivery date
  and the fixed price is called futures price.
• The value of future contracts is influenced by
  the value of the underlying asset. If the value
  of underlying assets rises it increases the value
  of future contracts too
• Future contracts can be transferred and can be
  traded. If the seller wants to move out of the
  contract the seller can transfer the ownership to
  some other party. This applies to the buyer as
  well
• Future contracts involve obligation from both the
  parties hence these contracts must be properly
  regulated to avoid chances of default. In India,
  SEBI looks after the futures trading to ensure
  smooth functioning
• Future contracts follow a standardized procedure
  and cannot be customized by any individual and
  the conditions cannot be negotiated
• The settlements in futures trading are done
  through cash. The differences in cash values are
  paid by one party to another

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Conclusion

• To sum up we understand the meaning of Futures
  and we know it is an agreement made at a fixed
  price in the future. It is dependent on the
  direction of the stocks price fluctuations.
• You should learn about derivatives even more to
  get a hold on the concept and become an active
  trader in the derivative markets.

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THANK YOU