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The futures markets · lesson 1 of 20
What a futures contract is
A future is a contract in which two parties commit to exchange an asset on a future date, at a price fixed today. The asset, called the underlying, can be a commodity, a stock index, a currency or an interest rate.
Unlike an option, a future is an obligation for both parties: the buyer must buy and the seller must sell, unless the position is closed before expiry.
Futures were created for agricultural products, to allow producers and buyers to fix the price in advance. Today most of the volume concerns financial instruments.
Questions
1. What does a futures contract establish?
An exchange on a future date at a price fixed today
The price is fixed today, the exchange takes place at expiry.
2. How does a future differ from an option?
It is an obligation for both parties
An option gives a right, a future creates an obligation.
3. For which goods were futures created?
For agricultural products
They served to fix the price of harvests in advance.
Next lesson: Standardisation and the exchange
Continue from lesson 4
The futures markets: an online course in 20 short lessons with quizzes and a final certificate, on Unicorn Academy.
This page in other languages
- Che cos'è un contratto future (Italiano)
- Qu'est-ce qu'un contrat à terme (Français)
- Was ein Futures-Kontrakt ist (Deutsch)
- Qué es un contrato de futuros (Español)
- O que é um contrato futuro (Português)
- Что такое фьючерсный контракт (Русский)
- 什么是期货合约 (中文)
- 先物契約とは (日本語)
- फ़्यूचर्स अनुबंध क्या है (हिन्दी)
- 선물 계약이란 (한국어)
- Vadeli işlem sözleşmesi nedir (Türkçe)
- Apa itu kontrak futures (Bahasa Indonesia)
- ما العقد الآجل (العربية)
- Hợp đồng tương lai là gì (Tiếng Việt)
- Czym jest kontrakt futures (Polski)