How do futures work to protect a position?

Futures contracts are agreements to buy or sell an asset at a predetermined price and a predefined date in the future. These instruments enable businesses, investors, and speculators to manage their portfolios by protecting them against adverse prices of commodities, indices, currencies and other assets. Futures protect from market volatility and potential gains when correctly utilised. This article will discuss how futures work to protect a position in Singapore.

Hedging

Hedging is one of the primary reasons for using futures contracts. It helps limit an investment’s exposure to risk by locking in current prices on the open market while simultaneously helping to avoid losses due to sudden price changes over time. It benefits investors relying heavily on commodities, indices, currencies, and derivatives. Additionally, investors can use hedging to avoid potential losses from changing interest rates, currency exchange rate fluctuations and stability of government policies.

Length of Contract

The length of …