Futures contract

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Futures contract

A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. A futures contract differs from an option in that an option gives one of the counterparties a right and the other an obligation to buy or sell, while a futures contract is the represents an obligation to both counterparties, one to deliver and the other to accept delivery. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.

Futures Contract

An agreement to buy or sell an asset at a certain date at a certain price. That is, Investor A may make a contract with Farmer B in which A agrees to buy a certain number of bushels of B's corn at $15 per bushel. This contract must be honored whether the price of corn goes to $1 or $100 per bushel. Futures contracts can help reduce volatility in certain markets, but they contain the risks inherent to all speculative investing. These contracts may be sold on the secondary market, but the person holding the contract at its end must take delivery of the underlying asset. Futures contract are standard instruments; that is, unlike forward contracts, their provisions are standardized. As such, they may be traded on an exchange.

futures contract

An agreement to take (that is, by the buyer) or make (that is, by the seller) delivery of a specific commodity on a particular date. The commodities and contracts are standardized in order that an active resale market will exist. Futures contracts are available for a variety of items including grains, metals, and foreign currencies. See also Section 1256 contracts.

Futures contract.

Futures contracts, when they trade on regulated futures exchanges, obligate you to buy or sell a specified quantity of the underlying product for a specific price on a specific date.

The underlying product could be a commodity, stock index, security, or currency.

Because all the terms of a listed futures contract are structured by the exchange, you can offset your contract and get out of your obligation by buying or selling an opposing contract before the settlement date.

Futures contracts provide some investors, called hedgers, a measure of protection from price volatility on the open market.

For example, wine manufacturers are protected when a bad crop pushes grape prices up on the spot market if they hold a futures contract to buy the grapes at a lower price. Grape growers are also protected if prices drop dramatically -- if, for example, there's a surplus caused by a bumper crop -- provided they have a contract to sell at a higher price.

Unlike hedgers, speculators use futures contracts to seek profits on price changes. For example, speculators can make (or lose) money, no matter what happens to the grapes, depending on what they paid for the futures contract and what they must pay to offset it.

References in periodicals archive ?
This return is determined by the societal rate of time preference, which is the premium on present goods (money that can be spent on consumption) over future goods (money that is earned from investment).
I am not worried that somebody will be telling me I'm overstepping my rights because I am well-intentional, I want to help, and I have a lot to give," stated the new President, blaming in advance any potential failures on part of the other state institutions to take up the future good ideas of the Bulgarian Presidency on themselves.
The backing the club's board has given us to try and develop as much young talent as possible has been fantastic, and we all want to see that continue for the future good of the Giants.
Our generation is not to make the future good, but to make it a bit better," Starakis said.
the key to of future good that up to problem The report finds that a literacy strategy aiming to have no children below functional literacy level by the end of Key Stage 2 after 10 years of its implementation is making good progress and that schools involved in the "reading power" campaign launched last autumn are showing signs of improvement.
Mitigation of climate change and its destructive effects depends on how we evaluated future goods in which William Nordhaus showed the quantification of the value of the future good of environmental preservation but Nicholas Stern claimed the benefits of reducing carbon emission would be far greater than the cost of reducing them.
The Vice President stressed that it was important for both Southern and Northern Sudan to wake up to the reality of the situation and begin to work on creating future good relations and cooperation as secession is the most likely scenario.
A Puppy for the White House" is an excellent teaching-tribute story that contains many essential elements needed to help children learn how to be good family members and future good citizens.
If credit in the economic sense means the exchange of a present good or a present service against a future good or a future service, then it is hardly possible to include the transactions in question under the conception of credit.
Carel argues that if this objection were well founded, then we should always fear death, no matter how old we are, because it always deprives us of some future good, and this is not a conclusion we want to embrace.
The technical forces in play, the global interrelations, the damaging effects on the real economy of badly managed and largely speculative financial dealing, large-scale migration of peoples, often provoked by some particular circumstance and then given insufficient attention, the unregulated exploitation of the earth's resources: All this leads us today to reflect on the measures that would be necessary to provide a solution to problems that are not only new in comparison to those addressed by Pope Paul VI [in 1967], but also, and above all, of decisive impact upon the present and future good of humanity.
3) Nevertheless, the proper object of hope as a theological virtue is God Himself; He is the future good that the believer expects to possess and enjoy.

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