What are Future contracts ?

Future contracts are a type of legal agreement to purchase or to sell a particular asset or commodity in the future at a specific time. These contracts are of a specific standard which facilitates quality and quantity in the future buyer of a futures contract is taking an obligation to buy the underlying asset buyer of a futures contract is taking an obligation to buy the underlying asset when the contract expires. The seller of the futures contract is taking the obligation to provide the underlying asset at the expiry date.

Future contract and futures are one and the same for example if a commodity trader says that he has purchased oil futures that means he has bought the same thing that is the oil futures contract. The futures contract is more general and is often used refer a trader as he is a futures trader. This contract is used by two categories of market participants hedgers and speculators.

To sell oil an oil producer or manufacturer has to use future contracts in this way they can lock the price at which the oil will be sold and then it will be delivered to the buyer Future contracts are available for many different types of assets future contracts are for stock exchange index commodities, and currencies.

Future contracts are traded for the sole purpose of earning a profit as long as before its expiration many of these contracts have an expiry of the third Friday as the price of the futures contract moves profit and loss position is reflected in the contracts.in this contract commodity futures contract is a type of contract in which agreement is made to purchase or sell a specified amount of commodity.