Futures is a product developed to reduce the risk factor that is associated with trading. It helps you to buy or sell commodities in future at a pre determined price fixed by the exchange or the market. These contracts are a kind of derivative product. The trading of these contacts can only be done in a futures exchange.
How futures work?
You can trade in anything be it shares or even currencies. But here we can understand the working of a future taking the example of shares. In futures trading you can buy a specific number of shares of a company at a certain price, say 100 shares at 50 rupees each. The stock size depends on the stock you are buying.
Normally you would have to pay 5000 rupees but here you just have to pay the margin amount. The margin amount is the percentage that is decided by the exchange on a daily basis. For example if the margin is fifteen percent, you will just have to pay fifteen percent of five thousand rupees, which comes to seven hundred and fifty. If next day the price of shares increase to 51 rupees , you gain 100 rupees as the difference between the price you bought at and current price is 1 rupee. And if the price dips to 49 rupees, you lose 100 rupees for the same reason.
This happens when you are selling futures. In case you had been buying, the situation would have been just opposite. That is you would have lost when the price of the share increased and gained if the price of the share decreased.
There are several
futures trading platform where you can trade in many commodities. Electricity is one of the recent one that has been added to the list of commodities that can be traded on future's platform.
Futures is a very old derivative product being used in foreign exchange to lock in prices at a future date. It helps you to protect your investments from the ever fluctuating market. These contracts are generally managed by the futures contract trader who decides the expiration date of these products.
One has to keep a regular watch over these products. Now days these are also available online. If one does not have the time to watch the markets himself, one can get in touch with the futures broker. You can get their contact details easily on the net.
In fact you can do all the selling and buying of shares from the comforts of your home, You can easily make your payment through credit cards, or your normal bank account. All you need to have is net banking facility. The money will be debited or credited in your account automatically depending on whether you lose or gain.
Use this commodity to hedge your risk, and earn greater returns from your investment
