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Finance
Futures Trading
Buying or selling contracts that obligate you to buy or sell an asset at a predetermined price on a specific future date — used for both speculation and hedging.
Futures trade on regulated exchanges: CME Group (Chicago, the world's largest derivatives exchange) covers interest rates, equity indices, forex, metals, and energy. ICE covers energy and agricultural commodities. Contracts are standardised — fixed size, fixed delivery date, fixed terms. This standardisation makes them highly liquid and easy to trade but also means positions are marked to market daily: if your position moves against you, your broker deducts losses from your account daily (and adds gains when you're right).
Futures are used in two primary ways. Hedging: an airline buys oil futures to lock in fuel costs for the next 12 months, protecting against price spikes. A farmer sells wheat futures to lock in a selling price before harvest, protecting against price falls. Speculation: traders take positions with no intention of delivering or receiving the physical commodity — they close out before expiry and take or pay the price difference in cash. Most retail futures traders focus on highly liquid instruments: E-mini S&P 500 futures, crude oil, gold, and currency futures.