What is a futures contract?

In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset transacted is usually a commodity or financial instrument.

What are index futures contracts?

In this article, we explain the basics of index futures contracts and what they represent. An index futures contract is a legally binding agreement between a buyer and a seller, and it tracks the prices of stocks in the underlying index. It allows traders to buy or sell a contract on a financial index and settle it at a future date.

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 .

How much does a futures contract cost on Day 51?

On day 51, that futures contract costs $90 (7h 30m) (7h 30m). This means that the "mark-to-market" calculation would require the holder of one side of the futures to pay $2 (0h 10m) (0h 10m) on day 51 to track the changes of the forward price ("post $2 (0h 10m) (0h 10m) of margin").