Key TAKEAWAYS
Key TAKEAWAYS
What are Futures?
Futures are contracts that necessitate two parties to make a transaction over a certain asset at a particular time and date. The seller and buyer must sell and buy the asset at the set price, irrespective of the current market price at the expiration of the contract.
Futures are contracts based on either financial security or a physical asset and are standard documents containing information about the quantity of the asset and the future date and price for the transaction to happen.
To work with futures, a high amount of leverage is required which means that the trader has to pay a certain fraction of the price initially and the rest is settled at the expiration of the contract on a future date. Depending upon the Future contract size, creditworthiness of the trader, and broker’s terms and conditions, the amount of initial leverage can vary. Moreover, at the expiration of the contract, the asset is required to be settled either with physical delivery or cash-settled.
Day trading involves buying and selling a ‘financial instrument’ within a single day. Various types of instruments are available in the market for traders to make use of. These instruments are capable of creating wealth for a trader if used correctly.
A stock represents the ownership of a portion of any corporation. Depending on the amount of stocks that an investor owns, they are entitled to the same proportion of profit. Stocks are measured in terms of ‘shares’.
Futures are contracts that necessitate two parties to make a transaction over a certain asset at a particular time and date. The seller and buyer must sell and buy the asset at the set price, irrespective of the current market price at the expiration of the contract.
Currencies are traded in pairs, say USD/INR i.e. US dollar and Indian Rupee. For, example if the associated price with the pair is 74.38 which means it’s going to take 74.38 rupees to buy 1 US dollar. Traders speculate on the price movement of the currency and trade currencies to create profit.
Options trading can be compared with betting on the horses at the racetrack. So, the chances of either winning all the profit or losing it all are one of the key features of futures trading.
