These are the limitations of futures and contracts:

Limited Flexibility: Futures contracts are standardized agreements, meaning that the terms are predetermined by the exchange. This lack of flexibility might not suit all traders or investors, especially those with specific needs or customized requirements like a smaller or a larger lot size, weekly or monthly expiry, etc.

Counterparty Risk: While exchanges act as intermediaries and guarantee the performance of futures contracts, there is still a level of counterparty risk. If the counterparty (either the buyer or seller) fails to meet their obligations, it can lead to financial losses.

Leverage and Risk: Futures contracts often involve significant leverage, which can amplify both gains and losses. This means that a small price movement in the underlying asset can result in substantial gains or losses for the trader.

Expiration and Rollover Costs: Futures contracts have expiration dates, after which they must be settled. This can lead to additional costs and complexities, especially for those who want to maintain exposure to the underlying asset beyond the contract’s expiration date. Traders may need to roll over their positions to a new contract, incurring transaction costs.

Market Volatility: Futures markets can be highly volatile, and rapid price movements may occur, leading to potential losses. The use of leverage in futures trading can make investors more susceptible to market volatility.

Initial Margin and Maintenance Margin: Traders are required to maintain a certain amount of funds in their trading accounts as margin to cover potential losses. If the value of the position falls below a certain level (maintenance margin), additional funds may need to be deposited, or the position may be liquidated.

Limited Underlying Assets: Not all assets have futures contracts available. The range of underlying assets is limited to those that are actively traded, and certain markets may not be as liquid as others.

Speculative Nature: Futures trading is often used for speculative purposes rather than hedging. Speculative trading can lead to increased market volatility and may not necessarily reflect the fundamentals of the underlying asset.

Regulatory and Geopolitical Risks: Changes in regulations or geopolitical events can impact futures markets. Unexpected policy changes or geopolitical tensions can lead to sudden and unpredictable price movements.