What is Futures contracts

A future contract is a financial instrument that legally binds the agreeing parties to purchase or sell an asset at an established price at a stipulated instance in the future referred to as the expiration date, irrespective of the market price at that time.

Future contracts or futures can be used by hedgers, especially in volatile markets with varying prices to lock in the price of the asset to be purchased in the future. This can be seen for example in the oil industry, to protect oil producers by guaranteeing the oil is sold at a specified price.

They can also be used by investors, referred to as speculators, making bets on the price movements of the assets.