Futures trading

Futures contracts are traded at futures exchanges, which act as a marketplace between buyers and sellers. The party who agrees to buy the underlying asset at the agreed futures price on the delivery date is said to be the long position holder, while the party who agrees to sell (deliver) the underlying asset at the agreed futures price on the delivery date is said to be the short position holder. As both parties risk their counter-party reneging if the price goes against them, the contract may involve both parties lodging a margin of the value of the contract with a mutually trusted third party for security. For example, in gold futures trading, the margin varies between 2% and 20% depending on the volatility of the spot market.