Futures Market

The futures market is a financial exchange where participants can buy and sell contracts for the delivery of assets at a predetermined future date and price. These contracts, known as futures contracts, are standardized agreements typically traded on organized exchanges. They are used for various assets, including commodities (like oil, grain, and metals), financial instruments (such as currencies and interest rates), and stock indices.In the futures market, buyers agree to purchase the underlying asset, while sellers agree to deliver it at the specified date and price. This market enables participants to hedge against price fluctuations, speculate on price movements, or gain exposure to different asset classes. As a result, it plays a critical role in price discovery and risk management in the economy. The futures market operates on a system of margin requirements, where traders put up a percentage of the contract’s value as collateral, allowing for leverage and potential greater returns (as well as risks).