Futures = Futures contract

What is a futures contract

A futures contract is a standardized agreement between two parties to buy or sell a specific financial instrument or commodity at a predetermined price on a future date.
Unlike forward contracts, futures are traded on regulated exchanges and have precisely defined conditions (volume, quality, delivery date).

How a futures contract works

• It trades on an exchange, which ensures settlement and minimizes the risk of non-fulfillment.
• It requires posting a margin (collateral) that covers potential losses.
• Futures prices move according to market expectations of the future value of the underlying asset.
• Most contracts are settled financially before expiration rather than through actual physical delivery.

Uses of futures contracts

• Hedging — protection against price fluctuations (e.g., a farmer locking in the price of wheat before harvest).
• Speculation — investors profit from price movements without physically holding the asset.
• Arbitrage — exploiting price differences between the spot and futures markets.

Examples of underlying assets

• Commodities — oil, gold, wheat.
• Financial indices — e.g., S&P 500 futures.
• Currencies — e.g., EUR/USD futures.
• Bonds — both government and corporate.

Futures contracts on the Stonkee platform

On Stonkee, you can monitor the current prices and trading volumes of selected futures. AI evaluates whether the price is in line with fundamentals and whether it may present an opportunity for hedging or speculation.

Summary

A futures contract is a versatile tool for both hedging and speculating on future price movements. Thanks to its standardization and trading on regulated exchanges, it ranks among the most popular derivatives in the world.