What is a futures contract?

A futures contract is an agreement between two parties to buy or sell an asset (Stocks, Indices, Currencies or Commodities) at a certain time in the future for a certain price.

To make trading possible, the exchange specifies certain standardized features of the contract. As the two parties to the contract do not necessarily know each other, the exchange also provides a mechanism that gives the two parties a guarantee that the contract will be honoured.

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