| gen. |
futures contract (A contract to buy or sell a good, share or currency on a future date, at a price decided when the contract is entered into. A futures contract entails for both parties both the right and the obligation to trade; it is contrasted with an option, which confers only the right to trade on one party and only the obligation on the other. Futures contracts can be used to reduce risk by traders who have to hold a good and want protection against a low price, or who know they are going to have to buy and want protection against a high price. The contract can also be used to speculate by a trader who has a different opinion about expected price movements from that prevailing in the futures market. With some futures contracts, each party actually contracts with a market authority, which balances its buying and selling contracts, and collects margin payments from each side to ensure that they will be able to honour their contracts. OE Alexander Demidov) |
