Concepts
Understanding Futures Contracts
A futures contract is simply an agreement to buy or sell something at a specific price on a future date. On Open Mandi, you trade gold and silver futures — meaning you're making bets on where you think the price of these metals will go.
What is a Futures Contract?
Imagine you're a jeweler who needs gold in three months. You're worried the price might go up between now and then. So you make a deal with a gold producer: "I'll buy 1 ounce of gold from you in three months at today's price of $2,850."
That deal is a futures contract. Both sides are locked in: the jeweler knows exactly what they'll pay, and the producer knows exactly what they'll receive.
On Open Mandi, you don't actually receive physical gold or silver. Instead, contracts are cash-settled — the difference between your entry price and the settlement price is calculated, and your account is credited or debited accordingly.
Why Trade Futures Instead of the Real Thing?
- Leverage — you can control a large position with a smaller amount of money (called margin). This amplifies both gains and losses.
- Go short — with futures, you can profit when prices fall, not just when they rise
- No storage — you don't need to worry about storing physical gold or silver
- Speed — futures settle digitally, much faster than physical delivery
Long vs. Short Positions
When you trade futures, you take a position:
- Long (buy) — you believe the price will go up. You profit if gold/silver rises above your entry price.
- Short (sell) — you believe the price will go down. You profit if gold/silver falls below your entry price.
For example, if you go long on gold at $2,850 and the price rises to $2,900, you've made $50 per contract. If the price drops to $2,800, you've lost $50 per contract.
Margin and Collateral
You don't need to put up the full value of a futures contract. Instead, you put up margin — a fraction of the contract value that acts as collateral.
On Open Mandi, your margin is held in USDT or USDC. If the market moves against you and your margin runs low, you may need to add more funds or your position could be liquidated ( automatically closed) to prevent further losses.
Liquidation
Liquidation happens when your losses eat into your margin to a point where the exchange can no longer guarantee your position. When this happens, your position is automatically closed at the current market price.
This is an important safety mechanism. It protects both you and the exchange from losses that exceed your collateral.
Contract Settlement
Futures contracts on Open Mandi are settled in stablecoins. When a contract expires or when you close your position, the profit or loss is calculated and your USDT/USDC balance is updated accordingly.
Risks of Futures Trading
Futures trading carries real risks that you should understand:
- Leverage amplifies losses — just as leverage can multiply your profits, it can also multiply your losses
- Liquidation risk — if the market moves sharply against you, your entire margin can be lost
- Volatility — commodity prices can change rapidly and unpredictably
- Not guaranteed — past performance does not predict future results
Because Open Mandi is an academic platform with small deposit limits, your risk is naturally constrained. But it's important to understand these concepts as they apply to real-world trading.