Futures contract
Also called: futures, future, index futures, stock futures
A standardised, exchange-traded agreement to buy or sell an underlying at a fixed price on a set expiry date.
Futures trade in lots, require margin rather than the full value, and are settled daily through mark-to-market. Gains and losses move in step with the underlying, and losses are not limited to the margin paid. Contract details are set by the exchange and change over time.
Example
One made-up contract of 500 shares at ₹1,000 has a contract value of ₹5 lakh; a ₹60 fall costs a long position ₹30,000.
Learn more in these lessons
- Forwards and futuresHow do futures work, and how much can you gain or lose?
- Basis, cost of carry and convergenceWhy is a futures price different from the spot price, and why do they meet at expiry?
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