Futures Contract – What is a Futures Contract?

Definition of Futures Contract: This can be explained as a contractual agreement generally created on the floor of trading of the future exchange and that force the seller to trade for a specific item, financial instrument or currency with the purchaser. A seller is commonly known as short while the purchaser is regarded long. The main difference between a forward and future is the future is generally traded on the exchange rate like ETC which signifies exchange traded contract against a forward bought over the counter also known as OTC. An OTC contract is generally bought from a broker or a bank and is not dealt with the exchange. Contracts in the future may ask for the physical rescue of the fundamental asset or specify that a currency settlement is the thing that is needed. A holder of future contract may start to signal the intention regarding the delivery of an underlying asset before few months from the delivery. Futures Contract is abbreviated by joining the term with the asset as it happens in the Forex futures. All these contracts come under the explanation of derivative which symbolizes a legal compulsion to carry transaction that been arranged as per the terms of different varieties of financial tools that sets its cost, like currencies, market indexes, commodities, stocks, bonds and interest rates.