That is 'The future contract' | Information 2019 - What is it?


  The future contract - the legal agreement to buy or sell special goods or an asset at the predetermined price in the demanded time in the future. Future contracts are standardized on quality and quantity to facilitate trade at the future exchange. The buyer of the future contract takes the obligation to buy a basic asset when the future contract expires. The seller of the future contract takes the obligation to provide a basic asset in time to the validity. 

2019 - Future contract

Future contract, Information - 2019

Similar questions:



Destruction of 'the future contract' | Information 2019 - What is it?


  "The future contract" and "futures" belong to the same thing. For example, you could hear that someone told that they bought oil futures that means the same thing as the oil future contract. When someone tells "the future contract", they, as a rule, address to a certain type of the future, such as oil, gold, communications or futures of S/P 500 of an index. The term "futures" more general, is also often used to treat the whole market, such as , "They are a dealer in futures".

Example of future contracts

  Future contracts are used by two categories of participants of the market: hedgers and speculators. Producers or buyers of a basic asset insure or guarantee the price at which the goods are sold or bought while investment managers and dealers can also conclude a bet in dynamics of the prices of a basic asset, using futures.

  The supplier of oil has to sell their oil. They can use future contracts, do it. Thus, they can take in the price which they will sell in, and then will deliver oil to the buyer when the future contract expires. In the same way the manufacturing company, probably, needs oil to make widgets. As they like to plan in advance and always to have the oil arriving in every month they can also use future contracts. Thus, they foreknow the price which they will pay for oil (the price of the future contract), and they know that will take oil supply as soon as the contract expires.

  Futures are available on many various types of assets. There are future contracts on share indexes, consumer goods and currencies.

Mechanics of the future contract

  Assume that the supplier of oil plans to make one million barrels of oil for the next year. It will be ready to delivery in 12 months.

  Assume that the current price makes $75 for barrel. The producer could make oil, and then sell it at the current market prices one year from now on.

  Considering variability of prices of oil, market price at that time could differ very much, than the current price.

  If the supplier of oil thinks that oil will be higher in one year, they can decide not to take in the price now. But, if they think that 75 - the good price, they could take - in the guaranteed selling price, having entered the future contract.

  The mathematical model got used to price futures who agrees in attention to the current cash price, reliable rate of return, time by a maturity, costs of storage, dividends, dividend profitability and crops of convenience. Assume that one-year oil future contracts are estimated at $78 for barrel. Having signed this contract, in one year of the producer oblige to put one million barrels of oil and as guarantee, will receive 78 million. The price of 78 is received for barrel irrespective of, where the prices of the market of cash goods at that time.

  Contracts are standardized. For example, one oil contract for Chicago Mercantile Exchange (CME) for 1.000 barrels of oil. Therefore if someone wanted to take in the price (sale or purchase) on 100.000 barrels of oil, they would have to buy/sell 100 contracts. To take in the price on one million barrels of oil(s) would have to buy/sell 1.000 contracts.

Trade of future contracts

  Sell at retail dealers, and investment managers aren't interested in delivery or receiving a basic asset. The retail dealer has not enough requirement to receive 1.000 barrels of oil, but they can interested in a gain of profit on price steps of oil. 

  Future contracts can be sold simply for profit until trade is closed before the expiration. Many future contracts expire on the third Friday of month, but contracts really vary, so check technical requirements of the contract of any and all contracts before to exchange them.

  For example, it is contracts in January and April, trade in 55. If the dealer believes that price of oil will grow before the contract expires in April, they could buy the contract in 55. It gives them control of 1.000 barrels of oil. They aren't obliged to pay 55.000 ($55 x 1.000 barrels) for this privilege, nevertheless. Rather broken only demands initial payment of edge, as a rule several thousand dollars for each contract.

  The profit or loss of situation fluctuate in the account as the price of steps of the future contract. If loss becomes too big, the broker will ask that the dealer placed more money to indemnify loss. It is called edge of service.

  The final profit or loss of trade are understood when trade is closed. In this case, if the buyer sells the contract in 60, they do 5.000 [($60-55) x 1000). Alternatively if reduction of prices to 50 and they close situation there, they lose 5.000.


Tue, 28 May 2019 22:25 GMTMondelez isn't feeling the heat from global consumer worries, CEO saysTue, 28 May 2019 19:31 GMTTobacco stocks tumble as cigarette sales declineTue, 28 May 2019 19:07 GMTDressbarn, CVS, Pier 1 and Topshop shuttering stores, pushing planned closures to 7,150Tue, 28 May 2019 18:54 GMTThe World Health Organization recognizes workplace 'burnout' as occupational phenomenonTue, 28 May 2019 17:26 GMTStocks making the biggest moves midday: Fiat Chrysler, AMD, Beyond Meat & moreTue, 28 May 2019 17:26 GMTAMD jumps about 10% after analysts say chipmaker is poised to take market share from IntelTue, 28 May 2019 16:44 GMTRoku's 200% surge this year has made the stock too expensive, analyst saysTue, 28 May 2019 16:30 GMTWalmart poaches ex-Google, Amazon exec Suresh Kumar for new CTO roleTue, 28 May 2019 15:21 GMTProsecutors say J&J ran 'deceitful, multibillion-dollar brainwashing campaign' in key opioid trialTue, 28 May 2019 15:00 GMTBrazil sues Big Tobacco over health costs from smokingTue, 28 May 2019 13:04 GMTBeyond Meat's shares jump 8% after European production deal is signedTue, 28 May 2019 12:39 GMTImpossible Whopper boosted Burger King traffic by 18%, report saysTue, 28 May 2019 11:41 GMTUS court rules partially in favor of Molson in its fight over a Bud Light adTue, 28 May 2019 11:18 GMTCiti slashes Apple outlook, saying trade war will likely cut China sales in halfTue, 28 May 2019 11:02 GMTJared Kushner, Google's Schmidt and Microsoft's Nadella to attend secret Bilderberg MeetingTue, 28 May 2019 11:00 GMTTesla's China-made Model 3 reportedly may be priced in the $43,400 to $50,700 rangeTue, 28 May 2019 10:36 GMTOklahoma and Johnson & Johnson face off in the first opioid crisis trialTue, 28 May 2019 07:14 GMTTrump concludes Tokyo visit as Japanese trade official plays down August deal chancesTue, 28 May 2019 07:02 GMTFrance insists any Renault-Fiat deal must protect French jobsTue, 28 May 2019 06:45 GMTDow drops more than 200 points as rates slide, stoking fears about the economyMon, 27 May 2019 14:01 GMTThe measles infected nearly every child in the US — until a vaccine was introducedMon, 27 May 2019 05:40 GMTFiat Chrysler and Renault propose merger to form world's third largest automakerMon, 27 May 2019 02:12 GMTTrump says he expects trade gap with Japan to be 'straightened out rapidly'Sun, 26 May 2019 15:30 GMTFormer Amazon executive uses Bezos' mock press release trick at his smart home companySun, 26 May 2019 15:00 GMTReview: The Lexus LX 570 is a serious off-road SUV that gives the Range Rover a run for the moneySun, 26 May 2019 15:00 GMTThese cars aren't coming back in 2020. Here are the ones we'll miss — or notSat, 25 May 2019 21:06 GMTStan Lee's former manager arrested for allegedly stealing $262,000 from late comic book legendSat, 25 May 2019 16:22 GMTMicrosoft, once considered a boring software maker, has outperformed tech unicorns since 2015Sat, 25 May 2019 14:30 GMTKurt Cobain's pizza plate sold for $22,400. Here's more celebrity garbage that sold for big money.Sat, 25 May 2019 13:30 GMTReal estate investor makes $11,875 a day in profit on Koenigsegg supercar he owned for five months

Warning About Refusal! The information on our website may be out-of-date and not official. For more information, please visit the Bank's official website.
For credit, insurance and account opening issues, please contact the Bank's consultant by phone. Thank you for using our site.


If we don 't have accurate information or it is out-of-date, please notify us by E-mail.





Leave your comment or question: