What is Future Trading?

Future Trading

Future trading is traded in Stock, Commodity and Currency market. Future trading is a type of contract and bond, according to which the price rate of exchange for trading a particular item will already be decided for the future. In this contract, the buyer and seller come together to fix the price for trading any particular item which will take place in the future.

For example, a trader has bought 100 shares of a company whose price is 100Rs per share. Now, after some time the trader came to know that the price will be going to fall in the future. So, he decides to trade the shares on future trading and searches for a buyer. He found a buyer who thinks that the price will rise and it is a good option to do future trading. The buyer and seller deal a future trading according to which the seller will sell the shares at a price 150Rs per share. It is a type of future contract this type of trading is called as Future Trading. In this trading both the traders are happy because they think it is a good deal for their future profit. Now if the price will go down the buyer will be in loss and if the price will raise the seller will be in loss.

When the seller transacts all shares on the decided day then it is called the settlement by delivery. The settlement of future in the index of nifty or stock market takes place in the form of cash. The rate of the contract of future changes according to the market. A future contract has a fixed and expiry date which is known as Maturity date and the fixed quantity is known as lot size or weight.