What are futures?

What are 'Futures'. Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on...

How do futures contracts work?

Futures contracts require the buyer or seller to buy or sell the asset on a specific agreed future date and price detailed in the agreement. Holders can, however, close their position before the expiry date.

What is futures speculation?

Futures Speculation. If market participants anticipate an increase in the price of an underlying asset in the future, they could potentially gain by purchasing the asset in a futures contract and selling it later at a higher price on the spot market or profiting from the favorable price difference through cash settlement.

What is a commodity futures contract?

A commodity futures contract is an agreement to buy or sell a predetermined amount of a commodity at a specific price on a specific date in the future. Bond futures are financial derivatives which obligate the contract holder to purchase or sell a bond on a specified date at a predetermined price.