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What is a futures contract?

Futures contracts are financial derivatives that oblige the buyer to purchase some underlying asset (or the seller to sell that asset) at a predetermined future price and date. A futures contract allows an investor to speculate on the direction of a security, commodity, or financial instrument, either long or short, using leverage.

Is a futures contract a derivative?

The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative .

What happens if a futures contract expires?

At expiry, you’d either settle or roll over your contract. Alternatively, you could trade futures via CFDs and spread bets, in the same way as any other market. Our futures markets are designed to replicate the pricing and expiry dates of the underlying market, without you having to enter into a futures contract yourself.

What is a futures exchange?

Futures exchanges perform similar functions to stock exchanges, providing a centralized forum for buyers and sellers to conduct business. The futures exchanges also play an important role as a “backstop” to every trade, guaranteeing that a contract will be honored and reducing so-called counterparty risk. Commercial entities.

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