What is a futures contract?

A futures contract is an agreement between two parties that obligates them to buy or sell a particular underlying asset. For example, commodities, currencies, or financial securities, at a specified price and on a future date. The two parties involved are called the buyer and the seller of the contract.

What is futures trading?

A futures contract, better known as futures, is a legally binding agreement between two parties to buy or sell an underlying asset (commodity or financial instrument) at a predetermined price at an agreed time in the future.

What is the difference between futures and options?

Futures are also compared to options, as both contract types enable you to buy and sell an underlying asset for a specific price on a future date. However, unlike futures, options contracts, give the buyer the right to leave the contract to expire worthless – they are not obliged to fulfil the contract at expiry.

Is a futures contract a derivative?

The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative .