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What you need to know about futures contracts

Futures contract or just futures is an agreement between two parties to buy or sell assets at a predetermined price at a specified date in the future. Underlying asset can be stock market index, currencies or most common commodities - oil. gasoline and gold. Buyer of the future has the obligation to buy the underlying asset when the future contract expires just like the seller has the obligation to provide the asset at the expiration date. Futures that are traded on commodity future exchanges are more standardized and regulated like Chicago Mercantile Exchange or  New York Mercantile Exchange. Standardized contract means that for instance, one future oil contract is for 1,000 of oil and one gold contract is for 100 troy ounces of gold. The Commodities Futures Trading Commission regulates the exchanges and require buyers and sellers to be registered. Futures are used by two types of market participants - hedgers and speculators. Guarantees to buy or sell at a cert...