Most ordinary investors focus on stocks, bonds, mutual funds, and exchange-traded funds (ETFs) in building their investment portfolios. However, there are other financial markets that play a key role in the overall economy, and although many investors never participate in them, futures markets are among the most important.
The futures market has its origins in the agricultural industry. Later, futures contracts were negotiated for natural resources such as oil. Financial futures were introduced in 1972, and in recent decades, currency futures, interest rate futures and stock market index futures have played an increasingly large role in the overall futures markets.
Futures have a useful function in managing risk. As such such they can be utilized by investors to efficiently hedge positions. Alternatively, futures can be used for speculative purposes.
