Glossary

A futures contract is a financial agreement between two parties to buy or sell an asset at a specified price on a predetermined date in the future. 📆

These contracts are standardised and traded on exchanges, allowing market participants to manage risk or speculate on the future price movements of various assets like commodities, currencies, or stock indices.

For example, a farmer might enter a futures contract with a buyer to sell 1,000 bushels of wheat at $5 per bushel six months from now, locking in the price and reducing the risk of price fluctuations. 🌾

Fun fact: Futures contracts date back to ancient times! There's evidence that they were used in ancient Mesopotamia, where farmers entered into contracts to deliver their future harvests to merchants. 🏺 This early form of futures trading allowed both parties to manage the uncertainties of agricultural production and market demand.