Futures contract

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In commodities a futures contract is an agreement between two parties to buy or sell a specified amount of a commodity, on an agreed future date, at a price that is set at the time that the contract is agreed.

Futures contracts are traded on a futures exchange, such as the London Metal Exchange, and are sometimes referred to as exchange traded derivatives.

It is possible to have contract settlement dates in excess of two years forward. A common variation on a futures contract is an options contract. This gives the buyer, or holder of the contract the right, but not the obligation to exercise the futures contract. And for more detail click and see wikipedia entry.

Derivative-stock-market-board

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