Futures contract

How it is used

Used on indices, currencies, commodities and interest rates. Traders go long or short futures, roll them over before expiry, and receive or pay daily gains and losses through margin. People usually just say 'futures': index futures, oil futures. Futures often trade before the stock market opens.

Example sentences

1. Index futures contracts pointed to a weak open before the stock market started trading.

2. The airline bought fuel futures contracts to lock in prices for next year.

Common collocations

• index futures
• oil futures
• futures market
• roll over futures
• futures contract expiry

Related terms

• derivativeA financial contract whose value depends on the price of something else, such as a share, an index, a currency, an interest rate or a commodity.
• optionA contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a fixed price before or on a certain date, in exchange for a payment called the premium.
• hedgeTo reduce the risk of losing money on an investment or business exposure by taking an opposite position, often with derivatives such as futures or options.
• leverageThe use of borrowed money or financial products to control a larger investment than your own money would allow, which increases both possible gains and losses.
• margin tradingBuying securities with money partly borrowed from a broker, using the investments in the account as security for the loan.

More terms: Derivatives

• call option
• put option