Futures contract

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In finance, a futures contract (often just called a future) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price or delivery price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative. Futures contracts are widely used for hedging price risk and for speculative trading in commodities, currencies, and financial instruments. Futures contracts are traded at futures exchanges, which act as a marketplace between buyers and sellers. The party who agrees to buy the underlying asset at the agreed futures price on the delivery date is said to be the long position holder, while the party who agrees...

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