Futures/ Futures Contract

A futures contract is a legally binding agreement to buy or sell a particular asset at a predetermined price at a specified time in the future. Futures contracts are standardized and traded on futures exchanges, such as the Chicago Mercantile Exchange (CME) or the Intercontinental Exchange (ICE).

Futures contracts are used to hedge against price risk or to speculate on the future direction of prices. They are commonly used in the commodities markets, such as for agricultural products, energy, and metals, but they can also be used for financial instruments, such as currencies and indexes.

In a futures contract, the buyer of the contract is said to be "long" and the seller is said to be "short." The buyer of a futures contract is obligated to buy the underlying asset at the agreed-upon price at the expiration of the contract, while the seller is obligated to sell the underlying asset at that price.

Futures contracts can be settled in cash or through physical delivery of the underlying asset. They are used by a wide range of market participants, including producers, processors, traders, and investors.

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