Futures

Futures, or futures contracts are contracts between buyers and sellers. The buyer or seller must transact at a predetermined price when (not before) the allotted time frame ends. These contracts can be traded on a futures exchange.

There are various types of futures contracts, such as in commodities, stock indices, currencies, metals and the US treasury. Most investors use futures to limit the risk of price fluctuation of an underlying asset.

Ideally, futures contracts oppose your underlying asset's movements. The idea is that if your asset makes a loss, your futures contract will balance it out and vice versa. If you see your futures moving in a direction that is unfavourable you can trade your futures before the expiration date.

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