September 11, 2009
What is a Futures Contract?
By Planet Wealth
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Stock Market Education & Training – Liberated Stock Trader.A ‘Future’ is a Futures Contract – essentially a legally binding agreement to buy or sell a commodity for a specific price at a predetermined time in the future.
If you buy a futures contract, it means that you promise to pay the price of the asset at a specified time.
If you sell a futures contract, you effectively make a promise to transfer the asset to the buyer of the future at a specified price at a particular time.
Every futures contract has the following elements:
• A Buyer
• A Seller
• A fixed expiry date (or maturity) some time in the future
• A price agreed upon, between the buyer and the seller, at the time of trade
So, a futures contract is a legally binding agreement to buy or sell a specific commodity, such as soybeans, or a financial instrument, such as gold or the Euro currency, on a particular date in the future, and at an agreed upon price.
Futures belong to a category of financial instruments known as derivatives, because their prices are derived from the value of the underlying instruments, items, or products.
Check out the E-mini webpage here…
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