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What is a futures contract?

Futures contracts are financial derivatives that oblige the buyer to purchase some underlying asset (or the seller to sell that asset) at a predetermined future price and date. A futures contract allows an investor to speculate on the direction of a security, commodity, or financial instrument, either long or short, using leverage.

What is the difference between futures and options?

Futures are also compared to options, as both contract types enable you to buy and sell an underlying asset for a specific price on a future date. However, unlike futures, options contracts, give the buyer the right to leave the contract to expire worthless – they are not obliged to fulfil the contract at expiry.

What are the different types of futures?

Metal Futures: These contracts trade in industrial metals, such as gold, steel, and copper. Currency Futures: These contracts provide exposure to changes in the exchange rates and interest rates of different national currencies. Financial Futures: Contracts that trade in the future value of a security or index.

When do CME & CBOT contracts converge?

For example, for most CME and CBOT contracts, at the expiration of the December contract, the March futures become the nearest contract. During a short period (perhaps 30 minutes) the underlying cash price and the futures prices sometimes struggle to converge.

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