📈📉Understanding futures 🤔

What are futures? 

Futures are a type of derivative contract agreement to buy or sell a specific commodity asset or security at a set future date for a set price. Futures contracts, or simply "futures," are traded on futures exchanges like the CME Group and require a brokerage account that’s approved to trade futures.

A futures contract involves both a buyer and a seller, similar to an options contract. Unlike options, which can become worthless at expiration, when a futures contract expires, the buyer is obligated to buy and receive the underlying asset and the seller of the futures contract is obligated to provide and deliver the underlying asset. 

Uses for futures. 

Futures generally have two uses in investing: hedging (risk management) and speculation.

Hedging with futures: Futures contracts bought or sold with the intention to receive or deliver the underlying commodity are typically used for hedging purposes by institutional investors or companies, often as a way to help manage the future price risk of that commodity on their operations or investment portfolio. 

Speculating with futures: Futures contracts are generally liquid and can be bought and sold up to the time of expiration. This is an important feature for speculative investors and traders who don’t own the underlying commodity nor wish to. They can buy or sell futures to express an opinion about—and potentially profit from—the direction of the market for a commodity. Then, prior to expiration, they will buy or sell an offsetting futures contract position to eliminate any obligation to the actual commodity. 

Types of futures.🦄

The types of futures available to trade include a wide range of financial and commodity-based contracts, from indexes, currencies, and debt to energies and metals, to agriculture products. Examples of futures contracts available are below (not an exhaustive list).

Financial Futures 📊

Index contracts and interest rate (debt) contracts are two types of financial futures. Index contracts provide exposure to specific market index values, while interest rate contracts are used for exposure to the interest rate of a specific debt instrument. 

• E-Mini S&P 500
• E-Mini Nasdaq
• E-Mini Russell 2000
• Mini Dow Jones
• E-mini Mid-Cap 400
• Micro E-minis (multiple indices)
• Bloomberg Commodity Index
• Nikkei 225 (CME)
• Volatility Index
• U.S. Treasury Bonds
• U.S. 10-Year Notes
• U.S. 5-Year Notes
• U.S. 2-Year Notes
• Eurodollars
• Federal Funds
• Ultra Bonds 

Currency Futures

Currency contracts provide exposure to the exchange rate of a real currency or crypto currency. 

• Euro 💶
• British Pound 💷
• Japanese Yen 💴
• Swiss Franc
• Canadian Dollar
• Australian Dollar 💵
• CME Bitcoin
• U.S. Dollar Index
• Brazilian Real
• Korean Won
• Mexican Peso
• New Zealand Dollar
• South African Rand
• Swedish Krona 

Energy Futures

Energy contracts provide exposure to the price of common energy products used by companies (for manufacturing, production, and/or transportation) and by governments and individuals for consumption purposes. 

• Crude Oil
• Natural Gas
• Heating Oil
• Gasoline
• Ethanol
• Brent Crude Oil 

Metal Futures

Metal contracts provide exposure to the price of certain metals that many companies rely on as materials for manufacturing and construction (e.g., gold for computers or steel for housing).  

• Gold
• Silver
• Copper
• Platinum
• HRC Steel Index
• Palladium