A futures contract is a financial agreement where two parties agree to transact a set of financial instruments for future delivery at a specific price. On the NSE, the primary platform for futures trading, traders have the option to trade Index Futures, Stock Futures, and Currency Futures.

One of the most commonly traded futures contracts in India is Nifty Futures.

To understand futures, consider this example: Raj wants to buy a computer priced at ₹20,000 but doesn’t have enough cash right now. He expects the price to rise in a month. So, he looks for a way to lock in the current price today and complete the purchase after 30 days.

To address this, Raj enters into a contract with the computer manufacturer. The agreement stipulates that one month from today, Raj will purchase the computer for ₹20,000, and the manufacturer will deliver the computer to him. In essence, Raj is securing the computer at today's price for delivery 30 days later. This arrangement constitutes a futures contract, characterized by a specified date and price for delivery, with no cash exchanged at the contract's initiation.

Futures trading involves the buying and selling of these contracts, allowing participants to speculate on future price movements and manage risks associated with potential price changes.