What is a Futures Contract?

What is a Futures Contract?

Futures trading is a financial tool that allows making a profit from asset price prediction. The key element in this type of trading is a futures contract. Two parties make crypto futures contracts where they indicate the following data:

  1. pre-agreed asset’s price for an underlying asset;
  2. conditions;
  3. an expiration date of the futures contract.

The mentioned data cannot be changed, and the parties must fulfill their obligations when the contract expires. Obligations are buying or selling an underlying asset. That is, one party is obliged to buy it, another – to sell. An underlying asset can be any commodity like crude oil or precious metals or, for example, crypto assets.

Crypto Trading Futures Contracts

DeFi Trading: Introduction to Futures

Crypto futures contracts work similarly to traditional commodities futures. By analogy with precious metals or any other physical commodities, crypto assets can be a subject of a futures contract.

How to trade crypto futures? The parties make a contract indicating the price and the date when they must fulfill their agreements. One of the parties opens a long position, another one – short.

A long position means that a trader expects the price will increase, so one will sell his holdings at a higher price on the contract’s expiration date.

Short means a trader believes the price will drop upon the contract’s expiration date, so one first sells his holdings and then repurchases them at a lower price.

Futures contracts are available on the WhiteBIT crypto exchange supporting the most popular crypto assets (BTC, SOL, ETH, etc.). The platform also offers demo trading, where users can practice different financial tools and see how they work without depositing their accounts with real funds. Thus, users receive priceless experience and skills they further use in real market trading. Also, users can try a different size of leverage to see how it impacts the result of futures trading.