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 illustrate the concept of futures, let's consider an example. Suppose Raj wishes to buy a computer valued at ₹20,000 but currently lacks the required cash. However, he believes that the price of the computer will increase in one month. Now, Raj faces a dilemma: how can he secure the computer at the current price of ₹20,000 and receive delivery 30 days later?

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.