# FUTURE: The most important Derivatives Contract…!!

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Indian share market offers a range of products for investment and trading purposes such as equity, mutual funds, IPO, NCD, and derivatives. The derivative market in India has seen a rapid rise after it’s an introduction in the year 2000. As most of us heard about the word “Derivative ‘’ in the mathematics class. The meaning of ” Derivative ” is the same as that of class in mathematics, where it refers to a value or a variable that has been derived from another variable. Most of the traders who trade in the stock market are aware of the complexity of the trade in the derivatives market. In India, the Derivatives market consists of two key product i.e. Future and option. Let’s look at the future first.

What is the Future?

Futures contracts are standardized contracts that allow the holder of the contract to buy and sell the respective underlying asset at an agreed price on a specific date. It is a traded contract. The parties involved in a futures contract not only possess the right but also are under the obligation, to carry out the contract as agreed. There are mainly five types of trading done in futures:

1. Individual Stock Futures
2. Commodity Futures.
3. Stock Index Futures
4. Currency Futures
5. Interest Rate Futures:

Let’s try to explain through examples:

1. Individual Stock Futures:

The buyer promises to pay a specified price for a single stock at a predetermined future point. The seller promises to deliver the stocks at a specified price on a future date.

1. CommodityFutures:

A commodity future is mainly an agreement to buy and sell predetermined amounts of a commodity at a specific price on a specific date in the future.

1. Stock IndexFutures:

stock index future is a type of futures contract that’s used to trade stock indices. It is mainly an agreement to buy and sell predetermined amounts of a commodity at a specific price on a specific date in the future.

1. CurrencyFutures:

These are exchange-traded futures contracts that specify the price in one currency at which another currency can be bought and sold at a future date. Futures contracts are legally binding and the parties which hold the contracts on the expiry date must deliver the currency amount on the specified date at the specified price.

1. Interest RateFutures:

An interest rate future is a futures contract that is based upon a financial instrument that pays interest. It is a contract between a buyer and a seller that agrees to buy and sell a debt instrument at a future date when the contract expires at a price that is determined today.

*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing