Futures

Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date.

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Underlying assets include physical commodities or other financial instruments. Futures contracts detail the quantity of the underlying asset and are standardized to facilitate trading on a futures exchange. Futures can be used for hedging or trade speculation.

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Futures—also called futures contracts—allow traders to lock in the price of the underlying asset or commodity. These contracts have expiration dates and set prices that are known upfront. Futures are identified by their expiration month. For example, a December gold futures contract expires in December.

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Traders and investors use the term "futures" in reference to the overall asset class. However, there are many types of futures contracts available for trading including:

 

• Commodity futures such as crude oil, natural gas, corn, and wheat

• Stock index futures such as the S&P 500 Index

• Currency futures including those for the euro and the British pound

• Precious metal futures for gold and silver

• U.S. Treasury futures for bonds and other products