Futures Trading

Futures are a type of contract to buy or sell a specified underlying asset on or before a predetermined date. You can find futures contracts on a wide range of underlying assets, including shares, oil, gold, agricultural products and even market indices to name a few.

Futures contracts are similar to options contracts, but there are some important differences. An options contract gives you the right but not the obligation to buy or sell whereas a futures contract must be settled. That means that the contract cannot simply expire worthless but has to be fulfilled.

The implications for profit and loss here are clear - with a futures contract, potential losses are limitless. For this reason, futures contracts are not often recommended for new investors. However, a full service futures broker can advise you on futures contracts if you think futures are a trading tool you can utilise.

Discount brokers can also trade futures as long as they have the appropriate qualifications and license. You must use an eligible futures broker to compete in futures trading on the ASX.

The ASX regulates several of its futures investment vehicles, but in general, futures contracts can vary in their terms and conditions. It's important to understand the risks and rewards of futures trading and the specifics of your potential futures contracts before trading futures.