Futures contracts: Swings and roundabouts

Speculation or risk mitigation? This instrument can do both!

What are futures?

Futures are financial contracts that allow two parties to agree on the price of an asset today, with the transaction taking place at a specified date in the future.

These versatile financial instruments that serve two main purposes: managing risk, and enabling speculation.  They help businesses stabilise costs and revenues while providing opportunities for traders to profit from market movements.

Although the concept may initially seem complicated, it is built on a simple idea: locking in a price now to reduce uncertainty later, or to take advantage of expected price changes.