Futures Contract

Unlike a spot transaction, a futures contract locks in a price today for a deal that settles later — days, months, or even years ahead. The contract specifies every detail: the asset, the quantity, the delivery date, and the delivery location or cash-settlement method. Because these terms are standardized by exchanges, futures can be traded freely between buyers and sellers who never need to negotiate the fine print each time. You can explore actively traded contracts across energy, metals, and agriculture on the /commodities page.

Two broad groups use futures. Hedgers — such as an airline worried about rising jet fuel costs, or a farmer locking in a wheat price before harvest — use them to reduce uncertainty about future prices. Speculators take the opposite side, accepting that price risk in hopes of profiting from price moves. Neither group necessarily intends to handle the physical commodity; most contracts are closed before delivery ever occurs. The what is a futures contract guide walks through the full mechanics.

A frequent point of confusion is margin. Buying a futures contract does not mean paying the full contract value upfront. Instead, traders post a deposit called margin — a fraction of the total value — which means gains and losses can be much larger than that deposit. This leverage is one reason futures markets can move sharply and why understanding volatility matters when reading futures data.