Futures

A futures contract is an agreement to buy or sell at a set price on a set future date. Unlike an option it is an obligation, not a right, so it must be honoured at expiry.

It was built to protect against price swings. A farmer fixes a selling price before harvest to avoid a collapse; a food company fixes a buying price to avoid a spike. Both sides purchase predictability.

The defining feature is margin. You post only a fraction of the contract's value, which builds leverage into the trade by design. Gains and losses multiply, and if losses exceed the margin you are asked to top it up.

That demand is a margin call, and failing to meet it triggers forced liquidation. Being right about direction but shaken out by volatility along the way is a common outcome — which is exactly why futures are dangerous for individuals. Individuals usually meet futures through index or overseas contracts, and those markets trade around the clock, so a margin call can arrive while you sleep. Sizing you can survive matters more than calling the direction.