🔍 Comparison of the best futures brokers

A futures contract is a financial agreement between a buyer and seller to exchange a financial asset at a predetermined future date and price. It is a derivative product whose value is based on the price of the underlying asset. This futures contract covers delivery of the underlying product at a future date—hence the term “future”—at a price agreed upon in advance. The underlying asset can be an index, a share, or a commodity. The contract can be traded by going long (buy position) or short (sell position) on the underlying asset. Settlement occurs on the agreed expiry date. Depending on the margin requirements, you gain exposure (sometimes significant) to the underlying. A margin call occurs if the underlying moves in the opposite direction of your trade. It is possible to lose more than your initial investment.

Futures contracts can also be used for hedging strategies to neutralise market risk in your portfolio.

Leverage, hedging, and access to diversified markets are the main benefits of using futures contracts.

There are many types of futures contracts. They may be based on commodities (e.g. oil, gas, wheat), stock indices (e.g. FTSE 100, S&P 500), currencies (e.g. pound sterling, US dollar), precious metals (e.g. gold, silver), or specific shares (e.g. Apple). A trader can speculate on price increases or decreases of a futures contract, without ever owning the asset itself, and profits if the price moves in the predicted direction.

Futures contracts allow you to diversify your portfolio risk by hedging, while also enhancing potential returns through speculative leverage if you wish to take a more aggressive stance.