Futures Contract

Definition of Futures Contract

A present right to receive at a future date a specific quantity of a given commodity for a fixed price. Clayton Brokerage Co. of St. Louis, Inc. v. Mouer, Tex.Civ.App., 520 S.W.2d 802, 804. Commodity futures contracts are commitments to buy or sell commodities at a specified time and place in the future. The price is established when the contract is made in open auction on a futures exchange. Only a small percentage of futures trading actually leads to delivery of a commodity, for a contract may change hands or be liquidated before the delivery date. Participants fall into two categories: commercial hedgers who use futures to minimize price risks inherent in their marketing operations and speculators who, employing venture capital, seek profits through price changes. Both purchase contracts with only a small margin payment. Futures prices are an indication of the direction of prices based on current market conditions. Such exchanges and transactions are regulated by the federal Commodity Futures Trading Commission. See also Option.

Currency futures contract. Futures contracts that allow one to purchase or sell a specified currency at a specified price on a specified settlement date.

That's the definition of Futures Contract in Black's Law Dictionary 6th Edition. Courtesy of Cekhukum.com.