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How is a futures contract different from a forward contract?

A futures contract is distinct from a forward contract in two important ways: first, a futures contract is a legally binding agreement to buy or sell a standardized asset on a specific date or during a specific month. Second, this transaction is facilitated through a futures exchange.

What are futures & how do they work?

Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. Here, the buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date.

How are futures regulated in the United States?

In the United States, futures contracts are regulated by the Commodity Futures Trading Commission (CFTC). Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price.

What is an exchange-traded futures contract?

An exchange-traded futures contract specifies the quality, quantity, physical delivery time and location for the given product. This product can be an agricultural commodity, such as 5,000 bushels of corn to be delivered in the month of March, or it can be financial asset, such as the U.S. dollar value of 62,500 pounds in the month of December.

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