Glossary · Rates & Instruments
Futures Contract
An agreement to buy or sell an asset at a predetermined price on a specified future date. On the PSX, single-stock cash-settled futures are available on select listed securities.
01—What is Futures Contract?
The definition — and what it means in practice.
A futures contract is a standardised agreement to buy or sell an underlying asset at a pre-agreed price on a specified future date. Futures are derivatives: their value comes from the price of something else (such as a share). Unlike spot (cash) trading, the trade is for a later expiry, and gains or losses depend on how the market price moves versus the contract’s agreed price.
Futures matter because they let investors take exposure to price moves without owning the asset in the cash market, often with leverage. That can be useful for hedging an existing holding or for expressing a short-term view, but it also increases risk: small price moves can create large percentage gains or losses, and losses can exceed the initial margin posted.
If you lock in Rs 100 today to buy a share next month and it’s Rs 110 then, you gain Rs 10; if it’s Rs 90, you lose Rs 10.
- A futures contract fixes a price today for a trade on a future date (expiry).
- Futures are derivatives; profit and loss come from price changes in the underlying asset.
- They are commonly margined and can be leveraged, amplifying both gains and losses.
- Futures can be used to hedge, but they can also increase portfolio risk if mis-sized.
02—How futures contract works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the Pakistan Stock Exchange (PSX), futures are available as single-stock cash-settled futures on select listed securities. “Cash-settled” means positions are settled in cash rather than by delivering shares, so the contract’s final outcome depends on the share price at expiry compared with the agreed futures price.
A PSX investor typically encounters futures through their broker’s derivatives facility alongside the cash market. Because futures are leveraged products, they are often discussed in the context of margin and risk controls. If the market moves against a position, additional funds may be required to maintain it, and the position may be closed if requirements are not met.
03—Common misconceptions
Where investors most often get this wrong.
A futures contract means I will receive the shares at expiry.
Not always. On the PSX, single-stock futures are cash-settled, so settlement is in cash based on the price difference rather than share delivery.
My maximum loss is the margin I deposit.
Margin is a performance deposit, not a loss limit. If the price moves against you, losses can exceed the margin and you may need to add funds.
Futures are only for speculation.
They can be used for hedging (reducing risk on an existing exposure) as well as for taking directional views, but both uses require careful sizing and risk management.
04—Using futures contract on BSL
Where this term shows up across the platform — with live data.
05—Frequently asked questions
What investors ask about futures contract on the PSX.
Frequently Asked Questions
A futures contract on the PSX is an agreement linked to an underlying listed share, where the final outcome is based on a future date. On the PSX, select shares have single-stock cash-settled futures, meaning the position is settled in cash rather than by delivering shares.
Cash-settled futures means the contract is settled by paying or receiving the cash difference between the agreed futures price and the price at expiry. You do not exchange the underlying shares as part of settlement.
No. Buying shares gives you ownership (including eligibility for corporate actions based on the shareholding rules). A futures contract is a derivative exposure to price movements for a set expiry; it does not necessarily create share ownership.
Yes. Because futures are typically margined and can be leveraged, losses can exceed the initial margin if the market moves significantly against your position. The broker may require additional funds to maintain the position.
A futures contract is an obligation to settle based on the contract terms at expiry. An option gives the holder a right (but not an obligation) to buy or sell at a set price, typically in exchange for a premium.
06—Related terms
Keep building the picture.
A financial instrument whose value is derived from an underlying asset such as a stock, index, commodity, or currency. Common derivatives include futures and options.
A derivative contract on the PSX where the settlement at expiry is made in cash rather than through physical delivery of shares. The difference between the contract price and the final settlement price is exchanged.
The amount of capital an investor must deposit with a broker to open or maintain a leveraged position.
The use of borrowed funds to increase the size of an investment position. Leverage amplifies both potential gains and potential losses. On the PSX, leverage is available through margin trading and futures.
The total number of outstanding futures or options contracts that have not been settled. Rising open interest generally indicates new money entering a trend.
Shares that the seller does not currently own, with the intention of buying them back later at a lower price to profit from the decline. Heavily regulated in Pakistan and not widely available to retail investors.
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