Futures
Futures are financial contracts that allow two parties to agree on the purchase or sale of a cryptocurrency, commodity, or other asset at an agreed-upon price and date in the future. Futures provide traders with leverage and the ability to speculate on prices without having to own the underlying asset.
The most common type of futures contract is a “long” position where one party agrees to buy an asset at a fixed price at some point in the future, while another party agrees to sell it. The buyer has an obligation to pay for and take delivery of the asset when it becomes due, while the seller must deliver it when required. In contrast, a “short” position involves selling first and buying later – this is usually used by speculators seeking profit from falling prices.
The use of futures can be beneficial for both buyers and sellers as they offer flexibility when trading assets. Buyers can lock in low prices today that will remain valid until delivery occurs sometime in the future; similarly sellers can protect themselves against drops in market value by locking in high prices now before values go down later on. Additionally, because there is no actual transfer of ownership during transactions between buyers and sellers prior to expiry/settlement dates, large amounts of money can be exchanged quickly without worrying about physical possession of goods or assets being involved .
In addition to their use among individual investors, futures are frequently employed by institutional investors such as hedge funds who wish to hedge their positions against potential losses resulting from movements in cryptocurrency markets or commodities exchanges like oil or gold.. They may also be used as part hedging strategy whereby small portions (or ‘lots’) are sold off periodically throughout certain periods even if no immediate loss appears imminent – thus minimizing any potential downside risk posed by large fluctuations within those same markets over timeframes that might span weeks months years etc.. Traders may also utilize them for arbitrage opportunities – taking advantage discrepancies between different markets which result from delays information flow etc.; thereby profiting from these differences via simultaneous purchases sales across various exchanges around globe simultaneously .
