Learn With ETMarkets: Futures Contracts 201- Analyzing Futures Contracts

Futures contracts are used by speculators to speculate on commodity, currency, and financial asset prices. Futures are leveraged instruments, allowing traders to control more assets with a small amount of capital. Risk management is essential as instances in the past such as the Hunt Brothers’ attempt to corner the silver market in the 1980s, highlight the significance of managing risks effectively. Traders close out their position or roll it over to a new contract with a later expiration date. Futures trading provides liquidity, easing hedging for producers and consumers, and reducing volatility caused by sudden changes in supply and demand.