#TradingPairs101 Trading 101: What is futures trading?

The futures market is multifaceted. It offers unlimited investment opportunities with an endless variety of options for underlying assets. At its best, it helps traders enhance their capital utilization through margin and leverage, hedge portfolio risks, and smooth out turbulence.

What are futures contracts?

A futures contract is simply an agreement between two parties to conduct a transaction involving a particular asset at a specific future time at a negotiated price. Each futures contract must contain the following elements:

The underlying asset (often referred to as the underlying): it is the "source" of value. A futures contract can be written on commodities, stocks, interest rates, and even digital currencies.

The expiration date.

The method of settlement, that is, do sellers have to deliver the actual underlying asset when the futures expire, or are they quoted the associated positions in cash?