What is Futures?

A futures contract is a standardized, legally binding derivative agreement where two parties commit to exchange an underlying asset—such as a commodity, currency, or stock index—at a predetermined price on a specified future date. Unlike options, both parties are obligated to fulfill the contract at expiration.

Traded on exchanges like the Chicago Mercantile Exchange (CME), futures are leveraged instruments, meaning traders can control a large contract value with a relatively small initial margin deposit. They are primarily used by producers and consumers to hedge against price fluctuations and by speculators to bet on future price movements.