What are the Types of Financial Futures?
Financial futures are created for trading in non-delivery items. The four types of financial futures that you can invest in are Single Stock futures, Index futures, Interest Rate Futures, and Forex futures.
Single-Stock Futures
You use single stock futures for the trading of public company stocks. Single stock futures focus on one stock and involve physical deliveries of the contracts to the long upon maturity. However, many individuals do not prefer single stocks because of their complexity and do not offer diversification of assets.
Index Futures
If you are looking to invest in financial futures, index futures offer the best opportunity. Index futures make it possible to trade with numbers where real stocks do not exist. The invention allows you to purchase part of shares if you cannot invest in full stock. Index futures provide an opportunity for you to diversify your portfolio. You find it easy to provide hedging against risk by purchasing indexes that fit your portfolio and do not overstretch your optimal risk.
Interest Rate Futures
Interest rate futures refer to contracts that you take against the interest acquired from bonds. However, the arrangements are not known as bond futures because you purchase them for the basis of risk hedging against bonds. As a borrower, you hedge against the volatility of bond prices and interest rates by ensuring that the bond’s price remains fixed at a particular price.
Forex Futures
The Forex market represents the most significant financial market that exists in the world. People trade currencies daily and use Forex futures for the basis of speculation and price hedging. A large number of investors make the Forex market a volatile industry, where the prices fluctuate and change rapidly. Forex futures present you an opportunity for you to leverage your investment while speculating upon prices. Large corporations use a futures contract as a means of hedging against international currencies.
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