Futures Exchange

A place where people can go if they don’t like where their lives are headed and want to swap futures with someone else.

That would be cool, wouldn’t it? But alas, a futures exchange is something different.

A futures exchange is a place—physical or virtual—where derivatives (i.e., futures and options) are traded. It’s like a stock exchange, but for futures. An important thing to note here is that the trades on these exchanges are standardized. Like...they have rules about everything from the size of the contract to the strike prices we can choose.

Futures exchanges can reduce some of the uncertainty of futures trading. Since everything is standardized and regulated, we know that the info we’re getting about stuff like expected price changes has been thoroughly vetted. Do exchanges take all the risk out of futures trading? No, of course not. But they can provide a place for us—or our brokers—to navigate the waters of derivative markets with a bit more confidence.