Reasons to trade futures
Hedge Price Changes
Go Long or Short Easily
Trade a 24-hour Market
A futures contract is an agreement between a buyer and a seller to exchange a specific asset, such as gold, oil or coffee, at a future date for a price agreed to today.
Traditionally a futures contact brings together two types of market participants; those who wish to mitigate risk (hedgers) and those who wish to profit from risk (speculators). Simply put, futures are an efficient method to exchange risk from one party to another.
For example, a ‘hedger’ can sell a futures contract to protect themselves against price fluctuations. While buying a futures contract will allow a ‘speculator’ to potentially profit from a rise in the price of the underlying asset value.
While investors may not bother to trade future contracts, it’s worth noting that futures contracts are a way for companies to hedge, particularly for companies that deal in commodities. For example, an oil and gas company may buy future contracts on oil in order to hedge their business against the risk of oil price fluctuating.
You can set up trade alerts on the TWS platform. Contact your account manager for more information.
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