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Futures Contracts

A futures contract calls for delivery of an asset (or in some cases, its cash value) at a specified delivery or maturity date, for an agreed-upon price, called the futures price, to be paid at contract maturity. The long position is held by the trader who commits to purchasing the commodity on the delivery date. The trader who takes the short position commits to delivering the commodity at contract maturity.

Figure 2.12 illustrates the listing of several futures contracts for trading on October 26, 2001, as they appeared in The Wall Street Journal. The top line in boldface type gives the contract name, the exchange on which the futures contract is traded (in parentheses), and the contract size. Thus, the first contract listed is for corn traded on the Chicago Board of Trade (CBT). Each contract calls for delivery of 5,000 bushels of corn.

futures contract

Obliges traders to purchase or sell an asset at an agreed-upon price at a specified future date.

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