Have you ever wondered, “What exactly is a futures contract?”.
Many investors new to futures trading ask this question – here’s the answer…
According the the CME Group (Chicago Mercantile Exchange) – the world’s largest futures exchange, the definition of a futures contract is as follows…
Forward and futures contracts are financial instruments that allow market participants to offset or assume the risk of a price change of an asset over time.
A futures contract is distinct from a forward contract in two important ways: first, a futures contract is a legally binding agreement to buy or sell a standardized asset on a specific date or during a specific month. Second, this transaction is facilitated through a futures exchange.
The fact that futures contracts are standardized and exchange-traded makes these instruments indispensable to commodity producers, consumers, traders and investors.
The CME Group has put together a short video on the Definition of a Futures Contact. I invite you to check it out as it’s very informative.
Insignia Futures & Options specializes in assisting investors new to futures trading. If you have any questions or to further discuss futures & options trading strategies, please feel free to contact me directly.
To get started trading futures & options, please visit our New Accounts web page to open your own trading account.
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