Derivative contracts to buy or sell an asset at a future date at an agreed-upon price — with powerful leverage across commodities, bonds, indices and crypto.
Futures contracts are standardised derivatives to buy or sell an asset at a future date at an agreed price. They exist for commodities, stocks, ETFs, bonds, bitcoin and more — offering powerful leverage unavailable through direct ownership.
Traders prefer futures because they can take a substantial position while putting up relatively little capital — giving far greater leverage than owning the underlying security. You can go long (profit from rising prices) or short (profit from falling prices), making futures ideal for both speculation and portfolio hedging.
Each contract specifies the unit of measurement, settlement method (cash or physical delivery), quantity of goods covered, currency of quotation, and grade/quality standards where applicable — for example, a specific octane of gasoline or purity of gold.
A commodities broker may allow 10:1 or even 20:1 leverage — far higher than the securities world. The CFTC warns that futures are complex and volatile. Always define your maximum acceptable loss with a stop-loss before entering any futures position. Never risk more per trade than you can afford to lose entirely.