A futures contract is a legal agreement to buy or sell a standardized asset on a specific date or during a specific month that is facilitated through a futures exchange. The futures contract specifies the quality, quantity, delivery time, and location for the given asset, which can be a physical commodity, such as corn, oil, or gold, or a financial instrument, such as a stock index, a currency, or a bond. The buyer of a futures contract is obligated to buy and receive the underlying asset when the contract expires, while the seller of the contract is obligated to provide and deliver the underlying asset at the expiration date.

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Futures contracts are standardized and exchange-traded, which means that they have the same terms for all participants and can be easily bought and sold on a regulated platform. This makes futures contracts useful for hedging or speculating on the price movements of the underlying assets. Hedging is a strategy to reduce the risk of adverse price changes by locking in a future price in the present. Speculating is a strategy to profit from favorable price changes by betting on the direction of the market.