In finance, a futures contract (more colloquially, futures) is a standardized forward contract which can be easily traded between parties other than the two initial parties to the contract. The parties initially agree to buy and sell an asset for a price agreed upon today (the forward price) with delivery and payment occurring at a future point, the delivery date. Because it is a function of an underlying asset, a futures contract is a derivative product.
Contracts are negotiated at futures exchanges, which act as a marketplace between buyers and sellers. The buyer of a contract is said to be long position holder, and the selling party is said to be short position holder. As both parties risk their counter-party walking away if the price goes against them, the contract may involve both parties lodging a margin of the value of the contract with a mutually trusted third party. For example, in gold futures trading, the margin varies between 2% and 20% depending on the
volatility of the spot market.
Source:
https://en.wikipedia.org/wiki/Futures_contract
Related terms:
Continuous Contract,
Lot and
Car
See also:
https://economictimes.indiatimes.com/definition/futures-contract
https://futures.tradingcharts.com/tafm/tafm4.html
https://www.nasdaq.com/investing/glossary/f/futures-contract
https://www.investopedia.com/terms/f/futurescontract.asp
