Futures contract is an agreement or a contract to buy or sell a certain amount of a specific commodity at a predetermined price at a specified time in the future.
What is the futures contract?
Futures contract is the obligation to buy or sell the commodity at a given time in the future at the price set today.
1. The contracts are interchangeable. That is, they are standardized with respect to goods, time and place of delivery.
2. The word “commodity” has a very broad definition and includes financial instruments and stock quotations.
3. The contracts are traded at the arranged and regulated futures exchange, so the buyers and sellers can easily find each other.
Note: the futures contract is an obligation (but not the right, as with options) and this obligation should be executed. In most cases, it is executed through a reverse transaction, as a result of which the seller closes the position (sold, if it was bought; bought, if it was sold). But in a narrow sense, the seller may keep the position until the delivery date when it is carried out by the stock exchange where these commodities are traded or by cash.
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