What is Futures trading? Can anyone explain it in layman terms with Examples please?

Please give real life examples like NIFTY Futures or something like that so that i can relate.





Can we trade in futures of any stock? Like Infosys Futures, Reliance Futures or Tata Steel Futures, etc?|||Futures means buying or selling for the future.


Nifty futures are opened for 3 months.


Nifty futures are available as lots. ie, one nifty future contract contains 50 derivatives of nifty.


Let the nifty be at 4800. And you think nifty may touch 5000 next month. Then you can buy some lots of nifty futures (If you think nifty can come down on october say 4700, then you sell futures). Value of nifty future may be playing around the actual nifty value. Suppose the market value of nifty future for october is now at 4850. You can buy 1 or more lots of futures now. Wait for an appropriate time to sell. or wait for the last Thursday of october (when the nifty oct. contracts expire).|||You are basically buying something for the future. This is because you want to invest in the particular thing but do not want physical delivery. So it would normally apply to indices, commodities, metals and oil etc.


Now let's suppose you think the price of oil is going up over the next three months. You cannot buy barrels of oil because you have nowhere to store it (presumably). So you buy the December Oil Future (if there is one) and then sell it to close, before you are required to take delivery. If necessary you can roll it over to the next futures contract.


Of course big companies are using futures to hedge their production. Let's say Conoco thinks the oil price is coming down ( and they are producing loads of the stuff), they can sell at todays price with the future and deliver physical sometime in the future.


Normally a share would be bought or sold via stock options rather than futures.|||Futures refers to commodity trading. For stocks, I think you mean options trading. Honestly, the best example of futures trading I can think of is the movie, "Trading Places."





In futures trading, you agree to a contract to deliver or buy a commodity. In trading places, it was orange juice. The villains had gotten inside information that there was going to be a terrible harvest and orange juice would be scarce (Driving prices up). They bought all the futures contracts they could find agreeing to buy gallons of orange juice at say, $2 a gallon. They thought they could corner the market and sell it at a profit.





Turns out, there was plenty of orange juice to satisfy those futures contracts and then some. The price fell but, the investors were still contractually obligated to pay the $2 a gallon.|||Future trading is you are buying something now in anticipation of price rise in future. for eg. if Nifty is trading at 4800 today and you feel that if would rise to 5000 in next 8 to 10 days then you buy nifty future at 4800 as soon as nifty trades above 4800 you start making profit but if it deeps below 4800 then you start making loss. this profit and loss is calculated on daily closing price now if you hold nifty future till expiry ie on last Thursday of every month on this day if nifty closes at 4900 you make profit of 100 point and if it deeps below then you make loss.


yes you can trade not any but many stocks in future. the list of stocks traded in future is available on nseindia.com