-->

FUTURES

FUTURES

A futures is a contract for buying or selling a specific underlying, on a future date, at a price specified today, and entered into through a formal mechanism on an exchange. The buyer of a futures contract is under the obligation to buy the underlying asset at the specified date. The seller of the futures contract is under the obligation to sell the underlying asset at the expiration date.

 

For example, Let’s assume that you are a farmer and produces rice. Your annual production is 100kg of rice. The current market price is Rs 200 per kg. The first option available to you is you produce the rice and sell it at current prices. But given the price volatility the market price can fluctuate and be lower. The second option available is you could fix a price now lets say Rs 2000 by selling a future contracts that obligates you to sell 100 Kg of rice after the harvest at fixed price.

 

Example:

 

Browse more

Downloads