The future can be a fickle thing to predict. One occurrence can completely changethe expected and have you going back to the drawing board trying to figure out the next course of action. Thus stating whether futures trading will rule the world someday may be difficult, what we can say, however, is that its future looks promising. Let’s take a step back at take a look at exactly what futures trading is and how it works.
Futures trading was developed as a way for sellers to lock in on prices. Due to constantly fluctuating markets, hedgers in a bid to provide stability and predictability to their business began offering future contracts. A futures contract is a legal agreement between two parties agreeing to buy or sell an underlying asset at a set price at a stated time in the future. Once a contract has expired, the buyer or seller is under obligation to buy or sell the underlying asset at the predetermined price regardless of the current market price at the time of expiration.
Now while hedgers mostly use the futures market to provide stability to their businesses, there is a group of futures traders known as speculators who are in for the profit they could make through the movement of the futures market. The fact is the futures market is a highly liquid, high risk, low margin market with a lot of potential for great profits both currently and in the future.