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Investment in Futures

 

Futures - derivative financial instruments, which can help to acquire some object in the future with pre-agreed price.

In the case of futures, the seller undertakes to sell the object, while the buyer to purchase it from him at the pre-agreed price and time. Futures are standardized contracts and traded on the securities exchange. To ensure that the buyer or seller will meet its obligations, traders has to pay some contributions before and during the investing process (will depend on market direction) or give some other insurances.


Most objects that are traded with help of futures are financial instruments or commodities. Trading futures is very risky. And even it‘s hard to say investing in futures because this financial instrument is too speculative to be an investment, so it‘s trading in futures, rather than investment.


Futures are generally used in many big companies as a hedging tool to capture commodity prices or as protection from fluctuations of currencies.


Usually futures are short and medium term contracts (until 3 years), but also on the market can be met long term futures (until 10 years) and those would be major currencies futures (USD, EUR, JPY).



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