Future Contracts

What is a Futures Contract?

A Futures Contract is a standardized contractual agreement, made on the trading floors of a futures exchange to buy or sell a specified commodity or financial instrument at a certain price at a future point in time.

The future date is the delivery date or final settlement date. The price of the futures contract at the end of a trading session on the exchange is the settlement price for that day of business on the exchange. These can’t be referred as ‘direct’ securities as in the case of stocks or bonds.

Futures contracts elaborate the quality and quantity of the underlying asset. They are responsible to facilitate trading on a futures exchange. Some of the futures contracts may demand for physical delivery of the asset, while others are stabled in cash.