A beginner’s guide to trading futures contracts

A beginner’s guide to trading futures contracts

Are contracts in which the buyer agrees to buy a commodity or financial instrument at a specified date and quantity at a later point in time, and the seller agrees to sell or deliver the asset as specified in the contract. These contracts were initially created to help businesses navigate unexpected costs. For example, profits in the airline industry can be heavily dependent on the price of fuel. To protect against a sudden surge in prices, an airline company can use a futures contract to lock in current prices, thus nullifying the impact of increasing fuel prices. Futures contracts can be settled in cash or with physical goods. For traders, the settlement is in cash, while some businesses may opt for physical delivery. A futures contract can derive its value from various . The most common types are commodities like wheat, corn, and crude oil. Precious metals like and silver, currencies, and stock indexes like the . But to trade futures, you'll want to understand the risks and investment strategies before moving forward. Here are four key areas that you'll want to get familiar with. Futures work differently from more mainstream investing options like . Other than , some investors