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Term

FUTURES
raagvamd, RaagVamdatt

This is a type of derivative. It is a contract through which an investor agrees to buy / sell a pre-specified quantity of the underlying at a pre-specified price and a pre-specified date.

By using a futures contract, an investor can lock into a specific price for an asset.

There is no direct cost associated with a futures contract.

Example:
On 1st November 2007, if an investor enters into a futures contract to buy 1000 shares of Reliance Indutries at Rs. 2000 per share on 31st December 2007, he would get the shares for Rs. 2000 irrespective of the market price of Reliance on 31st December 2007.

Related Terms: Options, Derivative
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