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 ?
Since value is imputed backwards to the factors and not forwards, all of the MVPs, or future goods supplied, are intricately related to consumption spending.
518), which changes the relative rankings of future goods and present goods at each stage as the MVPs and DMVPs of factors fall.
Now it is appropriate to describe the relative changes in present goods and future goods between the original factors and capitalists in the aggregate.
This creates an entirely different constellation of market prices, and hence future goods supplied and present goods demanded, as the comparative changes in the prices of factors of production increase or decrease depending on where they are located in the production structure.
8) In the second to last sentence, Rothbard is not saying that the supply of future goods is irrelevant to their present demand, but that they are no longer involved in the production process, while the capitalist must recoup his savings by selling the good in the future, as the capitalist plays an intermediary role.
The future goods supplied to the later capitalists is their input to the revenue earned from the produced good that is sold in the future, also known as their marginal value product (MVP), (9) while the present goods earned is their discounted marginal value product (DMVP).
The premium that he earns from the sale of present goods, compared to what he paid for the future goods, is the rate of interest earned on the exchange.
This proposition implies that irreversibility raises the value of future goods when z'.
Second, as seen, the contingent prices of future goods penalize risk more heavily in the irreversible economy than in the flexible economy.
If man, other things being equal, did not prefer satisfaction in the present to satisfaction in the future, he would never consume; he would invest all his time and labor in increasing the production of future goods.
Time preference may be called the preference for present satisfaction over future satisfaction or present good over future good, provided it is remembered that it is the same satisfaction (or "good") that is being compared over the periods of time (2009, p.

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