A futures contract locks in a price today for a transaction that settles later. Farmers, miners, and airlines use futures to hedge; speculators use them to bet on price direction. Contracts are standardised on exchanges, marked to market daily, and typically require margin. Losses can exceed the initial margin if prices move sharply against you.
Key takeaways
- Futures are derivatives: their value depends on an underlying asset or index.
- Daily margin calls can force exits before your longer view plays out.
- Hedgers reduce price uncertainty; they do not eliminate all business risk.
- Most retail beginners should learn spot markets thoroughly first.