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 ?
Braun states the traditional pure time-preference theory (PTPT) of interest as one comparing present goods with future goods. He criticizes Hulsmann's theory of interest on the same grounds, as "the term 'future good' [is] a synonym for the [term] 'means'" (p.
He said in future good news would be coming more and the news of load-shedding and subversion would become extinct.
My wife and I wish Leanne and her friends every success in their future good work.
He will convert one's sins into good by forgiving them and will reward one's present and future good deeds in the best way.
They helpfully pointed toward the remaining difficulties we face in understanding the systems that keep Canada from facing past evils in order to enter future good.
I must admit, for the presumed future good of the country, to being something of a sympathiser!
With a term limit, he said a president would be discouraged from making an "unpopular decision," even if it was "necessary for the future good," because his eye would be on reelection.
"They gave her the challenge of doing better than Jesse Owens and Carl Lewis by getting five golds and I think that got to her." While the superstars of the sport will always be a spur to the next generation, Diack said the best way to ensure the future good health of athletics is to make it available to all.
I'm hopeful that because we have such a good, young group, that trend will continue, and we'll attract future good players to the SPM program."
For example, the wife will know what foods the husband should eat and the children need to be educated about healthier foods for their own future good health.
An esprit de corps emerged among the men, which greatly contributed to their sustained commitment to the company and its future good health.
There are six core active consumers who can be targeted with nutritional products: 'disciples,' who believe that diet is very important and are therefore compulsive in their purchases (8%); 'managers' who balance competing priorities as best they can (48%); 'healers,' who feel compelled to eat more healthily owing to specific health problems (9%); 'investors,' who make healthy choices to ensure future good health (17%) and 'strugglers,' who yo-yo between healthy and unhealthy eating (13%).

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