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Futures contract: Difference between revisions
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''Adapted from [http://en.wikipedia.org/w/index.php?title=Futures_contract Wikipedia]''<br> | ''Adapted from a much longer [http://en.wikipedia.org/w/index.php?title=Futures_contract Wikipedia article]''<br> | ||
In [[finance]], a '''futures contract''' is a standardized [[contract]] between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed today (the | In [[finance]], a '''futures contract''' is a standardized [[contract]] between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed today (the “'''futures price'''” or “'''[[strike price]]'''") with delivery and payment occurring at a specified future date (the “'''delivery date'''"). | ||
The contracts are negotiated at a [[futures exchange]], which acts as an intermediary between the two parties. The party agreeing to buy the underlying asset in the future, the | The contracts are negotiated at a [[futures exchange]], which acts as an intermediary between the two parties. The party agreeing to buy the underlying asset in the future, the “buyer” of the contract, is said to be “[[Long (finance)|long]]”, and the party agreeing to sell the asset in the future, the “seller” of the contract, is said to be “[[Short (finance)|short]]”. | ||
The terminology reflects the expectations of the parties—the buyer hopes or expects that the asset price is going to increase, while the seller hopes or expects that it will decrease in near future. Futures contracts are often called simply | The terminology reflects the expectations of the parties—the buyer hopes or expects that the asset price is going to increase, while the seller hopes or expects that it will decrease in near future. Futures contracts are often called simply “futures”. | ||
In many cases, the underlying asset to a futures contract may not be traditional [[commodity|commodities]] at all – that is, for [[financial futures]] the underlying asset or item can be [[currencies]], [[securities]] or [[financial instruments]] and intangible assets or referenced items such as [[stock indexes]] and [[interest rates]]. | In many cases, the underlying asset to a futures contract may not be traditional [[commodity|commodities]] at all – that is, for [[financial futures]] the underlying asset or item can be [[currencies]], [[securities]] or [[financial instruments]] and intangible assets or referenced items such as [[stock indexes]] and [[interest rates]]. | ||
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===See also=== | ===See also=== | ||
*{{eqderivprov|Futures Price Valuation}} under the {{ | *{{eqderivprov|Futures Price Valuation}} under the {{eqderivdefs}}. | ||
*[[Equity Derivatives Anatomy]] | |||