Natural gas futures are agreements to buy or sell a specific amount of natural gas at a set price on a future date. Think of it as making a promise today to buy gas later — like reserving movie tickets now for a show next month at today’s price.
You trade natural gas futures on special exchanges. Producers, big companies, and even regular traders use them. It helps everyone plan and protect against big price swings.
How They Work (in ultra-simple steps)
- Pick a contract: Choose a month (e.g., November gas) and agree on a price per unit (usually per million British thermal units, MMBtu).
- Buy or sell:
- If you think prices will go up by delivery time, you buy a futures contract now.
- If you think prices will fall, you sell a contract.
- Hold or trade: You can keep it until the delivery date, or you can sell (or buy back) the contract before then.
- Settle it:
- You might actually take or give natural gas (rare for beginners).
- Most traders just settle in cash based on price differences at the end.
Simple Real-Life Example
Imagine you’re a bakery owner worried about rising energy bills.
- Right now, gas is ₹50/MMBtu.
- You buy a December gas futures contract at ₹50.
- December comes, and prices rise to ₹70/MMBtu.
- Your contract still bills you at ₹50, saving you ₹20 — protecting you from higher costs.
Or, if someone expects gas prices to drop to ₹30, they could sell a futures contract at ₹50 and profit from the ₹20 difference.
Why It Matters (Key Benefits)
- Price certainty: Lock in costs for businesses that depend on gas.
- Profit potential: Traders can make money by predicting price moves—up or down.
- Market flexibility: You can trade these contracts online anytime, without handling actual gas.
In short: Natural gas futures let you agree today on a price for gas later. You can trade them like a bet on where prices will go. It’s a smart way to protect against surprises or try to earn money from energy trends.
