What are" futures" when referring to stocks?

Question

What are" futures" when referring to stocks?

Answer 1

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Answer 2

Winky,

    Futures are basically the same thing as options.  You are paying for a contract that gives you the right to buy a certain commodity at a certain price...in the future.  That time in the future is set by the contract and one of the important variables, along with the price.  

    Bottom line - it's a bet on the price of something.  You are betting that you will be able to buy it cheaper in xx months because of your contract than the price actually is by that time.  

    Airlines do it with fuel hoping to minimize their costs.  

     By the way - because it's a contract to buy at a certain price, as opposed to anything representing an actual commodity,  if the price isn't higher than you hoped,  the contract will expire - worthless.   It's not a thing for the inexperienced investor unless they are into rolling dice level investing or psychic. Even experts get it wrong alot.

-Kevin

Answer 3

futures like options, are stock derivatives, that is their value is based on the value of a stock.  the difference is that with an option contract, you have the option to buy x number of shares at a future date for the agreed upon price.

with a futures contract, you must buy (or sell) the stock at a certain time for the agreed upon price.  

futures can be financially dangerious because it is possible to lose more money (much more) then you are investing.