Understand the Basics

Futures contracts are standardized agreements between two parties to buy or sell a commodity at a specified price at a future date. They are traded on exchanges, where buyers and sellers meet to negotiate prices and terms. There are three main types of futures contracts: cash, index, and interest rate. Cash futures are based on the spot price of a commodity, such as gold or oil. Index futures track the performance of an underlying index, such as the Dow Jones Industrial Average or Standard & Poor’s 500. Interest rate futures track the yield curve, which is the relationship between short-term rates and longer-term rates.

Futures contracts are agreements between two parties to buy or sell a certain amount of a commodity at a specific price at some future date. For example, if you want to know what the price of oil will be in five years, you could purchase a futures contract for oil. You would then pay a premium (or fee) to enter into the agreement. If the price of oil rises above the agreed upon price, you receive the difference back; if the price falls below the agreed upon price, the seller pays you the difference.

Futures contracts are agreements between two parties to buy or sell a certain amount of a commodity at a set price at some future date. For example, if you want to know what the price of oil will be in five years, you could purchase a contract to buy oil at $100 per barrel. If the price of oil rises above $100 per barrel, then you would receive the difference between the actual price and the contract price. If the price falls below $100 per barrel, you would lose the difference between the actual and contract prices.

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