What Are Futures?
If you are new to the financial markets, then you might be interested in knowing, what are futures? The futures are also popularly known as futures contracts. The futures contracts are the financial assets like bonds and stocks, however with some differences. These differences are the deciding factor which makes futures contracts online such an appealing investment for financial traders and investors.
In more detailed terms, the futures contracts are the standardized contracts which are signed in order to purchase or sale a specific good of particular set quality on a certain date in the future and at price which is determined by the market. This price is known as the futures price. The technique used to determine the futures prices is the instantaneous equilibrium existing between supply and demand along with the purchase and sale orders on the exchange at the time of the purchase or sale of the contract.
A typical futures contract consists of a standardized contract of a commodity established by a futures exchange. The following things are mentioned in the contracts:
Delivery date if the commodity
Amount of the commodity
Price of the commodity
The important point to note down is that the futures contracts online are trades on futures exchanges only. They are not direct securities as in case of stocks, bonds, rights or warrants. However, they are securities, although a type of derivative contract.
These days with the presence of computer and easy access to internet everywhere, the online futures contracts are very much in use. There are so online futures contracts brokers available on the internet. The traditional futures contracts and the online futures contracts is the same thing, with only difference is that online futures contracts are traded over the internet.
Coming back to our topic of discussion, what are futures, a little more details about the same. The futures contracts online provide the owner the obligation to take or make the delivery according to the terms of the contract, whereas the option grants the buyer the right, but not the obligation, to establish a position previously held by the seller of the option. Futures contracts ensure their liquidity by being highly standardized. The type of settlement in futures contracts is either cash settlement or a physical settlement as per the amount and units of the underlying asset mentioned in the contract.