futures contract
Definition
Binding contract made on the trading floor of a futures exchange to buy or sell a commodity, financial instrument, or security, on a stated future date at a specified price. These agreements are standardized in terms of quantity, quality, delivery location, and delivery time for each item, and do not normally result in an actual delivery but are settled (traded out) through counter-contracts. Used in hedging, futures contracts help mitigate the risk of wild price fluctuations. In contrast to an option (right to buy or sell an item that lapses if not exercised) a futures contract is an obligation fulfilled only by the completion of the transaction.
futures contract is in the Commodities & Precious Metals Trading, Disaster Planning & Risk Management, Investing and Securities & Futures Trading subjects.
futures contract appears in the definitions of the following terms:
bundle,
margin,
TED Spread,
forward contract,
spot month,
short selling,
Bermuda option,
contract grade,
intracommodity spread,
derivative security
and
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