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Futures Trading

Futures trading involves a buyer and seller agreeing to deliver a specified asset at a predetermined price, quality, quantity, date and location. The parties negotiate these contract details on the futures exchange. Futures trading helps with price discovery, hedging price risk, allowing producers and consumers to plan costs and purchases in advance, and helping exporters competitively quote future prices. In India, futures are traded for 41 commodities including spices, oils, fibers, and agricultural crops.

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103 views1 page

Futures Trading

Futures trading involves a buyer and seller agreeing to deliver a specified asset at a predetermined price, quality, quantity, date and location. The parties negotiate these contract details on the futures exchange. Futures trading helps with price discovery, hedging price risk, allowing producers and consumers to plan costs and purchases in advance, and helping exporters competitively quote future prices. In India, futures are traded for 41 commodities including spices, oils, fibers, and agricultural crops.

Uploaded by

Gaurav
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Futures Trading

Futures trading is an agreement between a buyer and a seller obligating the seller to deliver a specified asset of
specified quality and quantity to the buyer on a specified date at a specified place and the buyer, in turn, is obligated
to pay to the seller a pre-negotiated price in exchange of the delivery. 

In futures trading the contracting parties negotiate on, not only the price at which the commodity is to be delivered on
a future date but also on what quality and quantity to be delivered and at what place. Futures trading is usually
carried out on a futures exchange. 

Advantages of Futures Trading

 It aids in the process of proper price discovery and hedging of price risk with reference to the given
commodity.
 It is useful to producer because he can get an idea of the price likely to prevail at a future point of time and
therefore can decide between various competing commodities.
 It helps the consumer get an idea of the price at which the commodity would be available at a future point of
time. The consumer can do proper costing and also cover his purchases by making forward contracts.
 It provides the exporters an advance indication of the price likely to prevail and thereby helps them in
quoting a realistic price and secure export contract in a competitive market.

Futures Trading in India


Presently, futures trading is permitted in 41 commodities in India. These include pepper (domestic and international),
turmeric, gur, castorseed, hessian, jute, sacking, cotton, potato, castoroil (international), soyabean (oil and cake),
kapas, RBD palmolein, sugar and tea.

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