This article explores the concept of futures contracts as one of the most prominent financial derivatives that emerged with the development of markets. It is based on an agreement between two parties to buy or sell a specific asset at a set price on a future date. It explains that these contracts are often traded in over-the-counter (OTC) markets and are characterized by flexibility in setting their terms, but they involve credit risks due to the possibility of one party defaulting. The article also reviews types of futures contracts, such as interest rate, currency, and stock index contracts, in addition to fundamental concepts like strike price and forward price. It explains the role of leverage in enabling investors to control large positions with small capital, while emphasizing that it amplifies both potential profits and losses. Furthermore, it highlights the close relationship between leverage and financial risk, where higher leverage increases the likelihood of default and associated costs. Finally, the article focuses on the importance of risk management through hedging strategies, aiming to minimize potential losses without significantly impacting returns, while emphasizing that eliminating risk entirely is not possible.
