What does futures mean?

Futures in finance refer to a type of financial contract that obligates the buyer to purchase an asset (such as a commodity or financial instrument) at a specific price and date in the future. Conversely, the seller is obligated to deliver the asset at the agreed-upon price and date. Futures contracts are standardized and traded on organized exchanges, allowing investors to speculate on the future price movements of the underlying assets. They are commonly used by investors and businesses to hedge against price fluctuations and manage risk. Futures trading is a key component of the derivatives market and provides a way for market participants to gain exposure to a wide range of assets, including commodities, currencies, and stock indices. Additionally, futures can be used for purposes such as arbitrage, speculation, and portfolio diversification. Overall, futures play a significant role in the global financial system and are an essential tool for managing and transferring risk.