Thursday, 10 May 2018

Future Derivatives: Everything You Want To Know

Derivative securities derive their economic value from underlying assets. One of the key instruments is future derivative. It is part of stock recommendations of research through famous market planners like 24 Carat financial services.
A futures contract specifies delivery at a future date at a current price. In future trading, the buyer assumes the long position and the seller assumes the short position. Futures contracts can reduce risk through hedging. Hence, it is strongly recommended by commodity tips.
Some examples of the future market are Interest Rates, Stock Indices, stocks, Currencies etc
The best live example can be observed through a farmer. A farmer agrees to sell his harvest to the trader at the specific rate at a future date, say 25 Rs per kg after a month. If the market prices go up by 2 Rs, the farmer would be in a profit of Rs 2 per kg and if they go down, the farmer would be in a loss.

Advantages of using futures
Price Discovery: The futures market has become an important tool to determine prices, based on present and future estimated amount of supply and demand. Futures market prices depend on a continuous flow of information from around the world and thus require a high amount of transparency.
Risk Reduction: Future markets are also a place for people to reduce risk when making purchases. Risks are reduced because the price is pre-set, therefore letting participants know how much they will need to buy or sell.

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