What are Futures?

Futures is a popular trading instrument on Bursa Malaysia Derivatives that allows investors to speculate on the future price movements of various assets, from commodities to financial instruments. In this article, we will break down the concept of futures trading in simple terms for beginners to understand, while highlighting the role of Bursa Malaysia Derivatives in facilitating these trades.

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Futures are financial contracts that obligate the buyer to purchase a specific asset (such as commodities or index) or the seller to sell that asset at a predetermined price at a specified date in the future. These contracts are traded on organized exchanges like Bursa Malaysia Derivatives, which provide a centralised platform for buyers and sellers to engage in futures trading activities.

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Bursa Malaysia Derivatives, a subsidiary of Bursa Malaysia (Malaysia's stock exchange), plays a significant role in enabling futures trading in the country. It offers a wide range of derivative products, including stock index futures, commodity futures, and financial futures, providing investors with opportunities to diversify their portfolios and manage risk exposure.

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Key Terminology in Futures Trading:

1. Agreement: Futures contracts involve an agreement between two parties - a buyer and a seller.

2. Contract: A standardized agreement between two parties to buy or sell an asset at a future date.

3. Asset: They are based on various assets like commodities (like gold, oil, wheat), financial instruments (like stocks, stock indices), or currencies. One of the popular commodities offering from Bursa Malaysia Derivatives is the Crude Palm Oil Futures (FCPO).

4. Long and Short Positions: In futures trading, there are two main parties: the buyer (long position) and the seller (short position). The buyer agrees to buy the asset at the agreed-upon price, while the seller agrees to sell it.

5. Expiry Date: The date when the futures contract expires, and the settlement takes place.

6. Contract Size: The specified amount of the underlying asset in one contract.

7. Margin: An initial deposit required to initiate a futures trade.

8. Settlement: The process of fulfilling the terms of the futures contract by either physical delivery or cash settlement.

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In Webull Malaysia, we offer only FTSE Bursa Malaysia KLCI Futures (FKLI) and Crude Palm Oil Futures (FCPO) for Futures Trading.

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This document provides educational information and only expresses factual information. Webull cannot guarantee the accuracy or completeness of the content of this document, and we will not be responsible for any direct, indirect, or consequential losses caused by the use of materials contained within this document. The content of this document is for reference only and does not constitute any offer or investment advice. Please seek professional third-party opinions if necessary.