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What is Futures
Futures is a term for a financial contract between two entities in order to buy / sell a certain amount of commodity at a pre-agreed price, at a predetermined date in the future.

Futures is a term for a financial contract between two entities in order to buy / sell a certain amount of commodity at a pre-agreed price, at a predetermined date in the future. Futures is a type of financial derivative and include forward transactions. Futures contracts are usually negotiated between the owner of the commodity (gold, rice, coffee, …) and the trader. It is actually a contract with a deferred delivery date.

Futures in practice: When trading futures contracts, both parties bear the risk of future development of commodity price on the market - if commodity price falls, the owner of the commodity earns, in the opposite case, the trader. Futures contracts are therefore used by default for:

  • Tender transactions - buying and selling commodities
  • Hedging
  • Speculative trading in commodities

Futures contracts are traded almost exclusively on commodity exchanges. Sales manager (if the organization owns commodities) has the responsibility in the organization for trading futures.

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Last update: 03.11.2016

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