commodity futures definition

commodity futures

Binding contract to buy or sell a commodity at a fixed price, on or before a certain date. Commodity futures are standardized in terms of the quantity, quality, and delivery time for each commodity-except the price which is determined (at the time the contract is entered into) according to the demand and supply situation. In practice, physical delivery of the commodity rarely occurs because the delivery contracts are exchanged or closed out (traded out) before their expiration date. Also called security futures.

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