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Futures Option > Futures Contract Agreement for Trading
Futures Contract
A futures contract is a forward type of contract that is traded on a
futures exchange to buy or sell an underlying instrument at some appointed delivery date (or final settlement date) at a predetermined price. This price is the futures price.
Along with the futures price there is a settlement price -- the price of the underlying asset on the settlement date as calculated by the exchange. Settlement can be achieved either by physical delivery or by cash settlement.
Both the buyer and the seller of the futures contract are obligated to exercise the contract on the delivery date. Unlike the options contract where only the seller (writer) of the contract carries the obligation to buy or sell if the contract is assigned.
Futures traders are one of two stripes; (a) hedgers who are usually growers and producers, seeking to hedge their price-related-risk and
(b) speculators engaging for a profit interest due to price fluctuations with the commodity.
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