Futures in stocks are financial contracts that obligate parties to buy or sell an asset at a predetermined future date and price. Futures contracts are traded on futures exchanges like the CME Group and require a brokerage account that is approved to trade futures. A futures contract involves both a buyer and a seller, similar to an options contract. Unlike options, when a futures contract expires, the buyer is obligated to buy and receive the underlying asset, and the seller of the futures contract is obligated to provide and deliver the underlying asset. Futures generally have two uses in investing: hedging (risk management) and speculation.

Individual investors and traders most commonly use futures as a way to speculate on the future price movement of the underlying asset. They seek to profit by expressing their opinion about where the market may be headed for a certain commodity, index, or financial product. Some investors also use futures as a hedge, typically to help offset future market moves in a particular commodity that might otherwise impact their portfolio or business. Futures provide a few ways to diversify your investing in ways stocks and ETFs can’t. They can give you direct market exposure to underlying commodity assets vs. secondary market products like stocks. Additionally, they allow you to access specific assets that aren’t typically found in other markets.

Some of the most widely traded futures contracts are based on major commodities, such as crude oil, corn, gold, and soybeans; others are based on stock indexes, such as the S&P 500 Index; currency futures, including those for the euro and the British pound; precious metal futures for gold and silver; and U.S. Treasury futures for bonds and other financial securities. Futures trading can provide much more leverage than trading stocks, offering the possibility for very high returns but with very high levels of risk.

In summary, futures in stocks are financial contracts that obligate parties to buy or sell an asset at a predetermined future date and price. They are traded on futures exchanges and can be used for hedging or speculation. Futures contracts are available for a wide range of assets, including commodities, stock indexes, currencies, precious metals, and financial securities.