Futures trading

Futures trading is a form of investment which involves guessing on the price of a commodity or stock or index or currency going up or down in the future.Futures trading is mainly hypothetical ‘paper’ investing, i.e. it is rare for the investors to actually hold the physically, just a piece of paper known as a futures contract. Every contract is guaranteed and honored by the stock exchange, or more precisely, the clearing house or the clearing corporation of the stock exchange, which is an agency designated to settle trades of investors on the stock exchanges.
Futures trading
The term contract can be a little off-putting but it is mainly used because, like a contract, a futures investment has an expiration date. You don’t have to hold the contract until it expires. You can cancel it anytime you like. In fact, many short-term traders only hold their contracts for a few hours – or even minutes!

For example, I you are betting on gold price will rise in March so you can buy March expiry gold future today and get make profit out of it.
The nearer (to expiration) contracts are usually more liquid, i.e. there are more traders trading them. Therefore, prices are truer and less likely to jump from one extreme to the other. Other contract might trading in premium or discount and with wide bid ask spread means you have to pay more than current contracts.
Neither is there a limit on the number of contracts you can trade (within reason – there must be enough buyers or sellers to trade with you.) Many larger traders/investment companies/banks, etc. may trade thousands of contracts at a time!

All futures contracts are consistent in that they all hold a specified amount called as lot size. For example, in mcx gold has 100 quantity lot size, nifty has lot size of 50.
Futures contracts are available on different kinds of assets – stocks, indices, commodities, currency pairs and so on.

The Author

Pramod Baviskar

Professional Market Trader And Owner Of Dalal Street Winners Advisory And Coaching Services. Working Since 2007 And Online Presence Since 2010. We Provide Highly Accurate And Professional 1 Entry And 1 Exit Future, Option, Commodity, Currency And Intraday Stock Tips On Whatsapp With Live Support And Follow Up.
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