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 ?
Futures contracts can be traded just like stocks up until the time they are due.
The CBOT updates the index every January and July, and futures contracts are then bought and sold accordingly.
Further, the company said that the first tranche of products include the following regional futures contracts, Mini ICE Brent Crude futures; One-kilo Gold futures; Chinese Cotton No1 futures; Chinese White Sugar futures; and Chinese Renminbi futures, all of which will be settled in cash except the One-Kilo Gold futures contract that will be physically settled, with delivery in Singapore.
The 10 year Long Gilt futures contract, which was established in 1982, has seen consistent annual growth, with an average daily volume in 2014 year to date of 166,744 contracts.
DGCX has also established a Copper Advisory Group, an informal body composed of copper market players that provides the Exchange advice on the design of the Copper Futures Contract; and facilitate vital market feedback.
The rationale behind the new Micros is similar to that of the original E-mini S&P 500 futures contract CME Group launched in 1999, near the end of a multi-year bull run for U.S.
In the fourth quarter of 2019, pending regulatory reviews, CME Group will launch two new financially-settled gold futures contracts denominated in U.S.
These six futures contracts are based on universally traded benchmarks and the trading and operational mechanism is similar to the already listed contracts of international commodities at the Exchange.
The Order finds that during the period starting at least May 2016 through May 2017, Trader A placed multiple orders for futures contracts with intent to cancel the orders before their execution.
The Indian Commodity Exchange (ICEX) had approached Sebi seeking its nod to launch petrol and diesel futures contracts. Following this, the capital markets watchdog had sought views from the ministry in this regard.
The salient features of the PMEX wheat futures contracts include compulsory delivery, swift payment to seller or farmers, quality certification of wheat and availability of multiple grades of wheat for trading.
The Dubai Gold and Commodities Exchange (DGCX) today announced the launch of two new pairs of Mini Indian Rupee (INR) futures contracts denominated in British Pound (INRGBP) and Euro (INREUR) respectively.