Futures Contracts

A futures contract is a legal agreement to buy or sell an asset, such as commodities or financial instruments, at a predetermined price on a specific future date. These contracts are standardized and traded on exchanges, allowing parties to hedge against price fluctuations or speculate for profit. For example, a farmer might sell a futures contract for wheat to lock in a price before harvest, while an investor might buy a contract to profit from expected price increases. Futures help manage risk and provide a way to invest in future price movements.