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What is a futures contract?

A futures contract is a legally binding agreement to buy or sell a standardized asset on a specific date or during a specific month. Typically, futures contracts are traded electronically on exchanges such as the CME Group, the largest futures exchange in the United States. How do futures contracts work?

Why should you invest in futures contracts?

Commodities such as oil are typically costly to deliver and involve high storage expenses, but through the use of futures contracts, investors and traders can speculate on a wider variety of asset classes without having to physically trade them.

What happens if a futures contract expires?

Leveraged exposure can increase your total returns. Leverage can lead to higher losses due to unfavorable price movements. You must fulfill the contract at expiration. You cannot walk away from a futures contract at expiration like you can with an options contract.

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