Futures
Standardized contracts to buy or sell an asset at a predetermined price on a specific future date.
Definition
Futures are standardized financial contracts obligating the buyer to purchase, or the seller to sell, an asset at a predetermined price on a specified future date. Unlike options, futures contracts carry an obligation — both parties must fulfill the contract at expiration. Futures are traded on exchanges like the CME Group and cover commodities (oil, gold, wheat), financial instruments (S&P 500, Treasury bonds), and currencies. They are used for hedging (farmers locking in crop prices) and speculation. Futures trading uses margin, typically 5-15% of the contract value, providing significant leverage. Daily settlement (mark-to-market) means gains and losses are realized each day.
Related Terms
Options
Financial contracts giving the buyer the right, but not the obligation, to buy or sell an asset at a set price.
TradingLeverage
Using borrowed capital to increase the potential return of an investment.
TradingMargin
The collateral required to open and maintain a leveraged trading position.
MarketsCommodities
Raw materials or primary agricultural products that can be bought, sold, and traded.