A cash contract in which a seller agrees to deliver a specific commodity to a buyer at a specific time in the future. A method of anticipating future price movement using supply and demand information. Futures contracts are standardized according to the quality, quantity and delivery time and location for each commodity. The only variable is price, which is determined on an exchange trading floor. The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market.
Hedgers use the futures markets to protect their business from adverse price changes.
The amount a futures market participant must deposit into a margin account at the time an order is placed to buy or sell a futures contract. An option having intrinsic value. Also referred to as spot month. Each option transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted. A contract that conveys the right, but not the obligation, to buy or sell a futures contract at a certain price for a specified time period.