A contract in which the seller agrees to deliver a specified commodity or financial instrument at a specified price sometime in the future. A futures contract is traded on a recognized exchange. Unlike a forward contract, the terms of the futures contract are standardized by the exchange and there is a secondary market.
What are Futures?
Futures are financial contracts that allow individuals or institutions to buy or sell a specific underlying asset, such as a commodity, currency, or index, at a predetermined price and date in the future. Futures are traded on regulated exchanges, and are used as a way to hedge against market risk or to speculate on price movements.
In a futures contract, the buyer agrees to purchase the underlying asset at the agreed-upon price on the specified date in the future. The seller agrees to sell the underlying asset at the agreed-upon price on the specified date.
Futures contracts are typically used by producers, manufacturers, and other market participants who want to lock in a price for a commodity they will be producing or buying in the future, to hedge against price swings in the market. Futures are also used by speculators who want to bet on price movements in the underlying asset, without actually having to own the asset.
Futures contracts have specific terms and conditions, including the underlying asset, the price, and the delivery date, and are standardized by the exchange on which they are traded.
Overall, futures are an important financial instrument for hedging market risk and for speculating on price movements, and are widely used by individuals, institutions, and corporations around the world.
