Learn more about Futures Trading

Futures may be used to hedge a portfolio or profit from taking a position as to the future direction of an index or commodity.  Such trading can be high risk and you could lose more than your initial investment.

What are futures?

A futures contract is the obligation to buy or sell a commodity at a pre-determined future date, at a price agreed today.

The commodity may be a physical product, such as wheat or wool, or financial product, based on interest rates or stock indices. The quality and quantity of the product is fixed, with the price and time to expiry the only variables. This allows market participants to trade with each other on regulated exchanges.

Futures are used for both hedging and speculative purposes. Few market participants actually deliver on the commodity; they usually trade out of their position.

Example

The ASX 24 wheat contract is for 50 tonnes of wheat. If you buy a wheat contract today for delivery on a specified date in March (March wheat), you are agreeing the price that will be paid on the delivery date.

In practice few market participants actually proceed to delivery, choosing to trade out of their position before the delivery date. In this example, you could sell at any time before the expiry date, exiting your position. If prices go up, you make a profit (that is, the difference between the buy and sell price). If prices go down, you make a loss.

Alternatively you can enter into a contract to sell the commodity at a certain price (regardless of whether you hold the commodity), when you expect prices will fall.

Find out more

Call 1800 502 025 today for more information and to speak to one of our Futures & Options specialists.

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