What are Futures

What are Futures

When it comes to trading futures, there are a few things you need to know. First and foremost, a futures contract involves both a buyer and a seller, similar to an options contract. Unlike options, which can become worthless at expiration, when a futures contract expires, the buyer is obligated to buy and receive the underlying asset and the seller of the futures contract is obligated to provide and deliver the underlying asset.

One of the most important things to understand about futures trading is that it is a highly leveraged investment. This means that you can control a large amount of the underlying asset with a relatively small amount of capital. For example, let’s say you wanted to buy a futures contract for gold. With leverage, you could put down $5,000 and control $100,000 worth of gold.

Now, while leverage can offer potential rewards, it also comes with risks. If the price of gold moves against you, you could lose your entire investment. That’s why it’s important to have a firm understanding of the market before you start trading futures & one last thing to mention PDT Rules do not apply to futures trading. This means lower minimum requirements for day trading. 

Another thing to keep in mind is that futures contracts are not standardized like other financial instruments. This means that there can be significant differences in the contract terms from one broker to another. Be sure to review the contract terms carefully before you trade.

Finally, it’s important to remember that futures trading is a complex and risky investment. It’s not for everyone. If you’re thinking about trading futures, make sure you understand the risks involved and speak with a financial advisor to get started.

Now that you have a basic understanding of futures trading, you’re ready to start exploring the possibilities.