CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

What are futures?

Futures are among the most common derivatives and play a crucial role in financial markets. They help reference pricing expectations for products as varied as commodities, stocks and interest rates. They can also be used in the procurement of raw materials and to hedge against market volatility.

As opposed to spot markets, where the price you pay for a product is the current price for immediate delivery, a futures contract is an agreement to buy a product at a future date at an already specified price. 

Many companies that rely heavily on fuel and materials, such as metals that are sold on commodity exchanges (and therefore subject to speculative price swings), buy futures contracts to help smooth volatility – as the price for delivery in 12 months might be cheaper than the current spot price.

But other, non-physical assets can be traded as futures too. Among the most popular are stock index futures and interest rate futures, which are generally used by portfolio managers as a hedging strategy.

Let’s say you’re the procurement officer at Alpha Aluminium, a maker of cast aluminium products. You buy most of your metal on the spot market, but due to seasonal factors there are more orders for your company’s products in the second half of the year. 

You’re currently buying at $1,700 a tonne on the spot market, but the futures market indicates you could buy at $1,600 a tonne five months from now. As long as the spot price remains above $1,600 in five months’ time, you’ve saved your company money.

Who wins?

You, if you get it right. If, in five months’ time when the futures contract expires, the spot price is still $1,700 a tonne, the writer of the contract owes you $100 per tonne. The danger is always that you’ll end up on the wrong side of the bet. If, in five months’ time, the spot price has fallen to $1,500 a tonne, you owe the writer of the contract $100 per tonne.

Test yourself

Which of the following assets can be traded as futures?

All answers provided are correct
Stock indices
Interest rates
Next lesson

What are options?

Looking for more?

Education Hub

You’ll find everything you need to know here; from how-to guides to investment strategies.

Trading Guides

Our in-depth guides will provide you some insights into the wide variety of financial instruments, their unique features and how to use them in your trading portfolio.

Trading Glossary


That's the number of terms in our glossary.

Do you know your CFDs from your IPOs or ETFs? Remove the mystery with our definitions glossary.

See all

Term of the day


A marketplace where buyers and sellers come together to trade in stocks and shares , commodities , derivatives , currencies and other financial instruments. Today’s exchanges are highly regulated to ensure that markets are organised...

Read more
The most common word

Closing Price

Looking for a closing price definition? The closing price is a security’s trading price at the end of a day’s business in a financial market. This makes it the most recent valuation of a security until the next trading session. Where...

Read more

Still looking for a broker you can trust?

Join the 570.000+ traders worldwide that chose to trade with

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading