Derivatives
What is Futures Contract?
A futures contract is a standardized agreement to buy or sell an asset at a predetermined price on a future date, unlike options, both buyer and seller are obligated to execute.
Formula
Futures Price ≈ Spot Price × (1 + Risk-Free Rate - Dividend Yield) for the contract period
How to Interpret
Futures are used for speculation and hedging. In US markets, the most liquid contracts are equity index futures - E-mini S&P 500 (ES) and E-mini Nasdaq (NQ), which trade on quarterly expiry cycles (Mar/Jun/Sep/Dec); commodity futures like Crude Oil (CL) and Gold (GC) typically have monthly expiries. Or international markets like India: stock and index futures require ~15–20% margin and settle on the last Thursday of each month.
Typical Ranges
Track futures premium/discount to spot price. Persistent discount may signal bearish sentiment.