Knowledge
Understand core FX, risk, and execution concepts used across Okoora’s infrastructure.
American Trigger, Bid, At The Money (ATM) Option
Futures contracts are standardized agreements traded on regulated exchanges such as the CME or ICE, making them highly accessible and liquid. One of their defining features is daily mark-to-market settlement, where gains and losses are calculated and settled at the end of each trading day, ensuring ongoing margin compliance.
A standardized, legally binding agreement to buy or sell a specific amount of currency (or another asset) at a predetermined price on a future date. Unlike forward contracts, futures are traded on regulated exchanges and are subject to daily margining and clearing through a central counterparty.
These contracts are used to hedge against currency risk or speculate on price movements, with fixed contract sizes, maturity dates, and settlement procedures. Because they are exchange-traded, futures offer high liquidity, transparency, and reduced counterparty risk compared to over-the-counter products like forwards.
For example, an importer expecting to pay for goods in Japanese yen in three months could buy JPY futures to lock in the exchange rate and protect against a weaker domestic currency.
Depending on the specific contract, futures can either result in the physical delivery of the underlying asset or be cash-settled, allowing participants to gain exposure without handling the actual commodity or financial instrument.
Futures are widely used in currency hedging, interest rate management, and commodity trading, and are essential tools for managing market risk in a controlled, exchange-based environment.
Futures contracts play a vital role in hedging and speculation. They allow businesses to lock in prices, manage risk, and provide liquidity to markets. Investors can gain or reduce exposure to asset classes efficiently and with leverage, while speculators provide liquidity and pricing efficiency.
A wheat farmer hedging a future harvest might sell futures contracts to lock in a profitable price. If prices fall at harvest time, the loss on the physical wheat is offset by gains on the futures contract. Alternatively, a trader bullish on oil might buy oil futures, profiting from price increases without owning physical oil.
