What is a Futures Contract

A futures contract is an agreement between two parties to buy or sell some asset at a pre-specified price on a future settlement date. The video below provides a little more detail about what goes into a futures contract.

For discussion

1. What is the difference between a futures contract and a forward contract?

2. What is the difference between a futures or forward contract and a spot contract?

3. What does it mean to be LONG or SHORT a futures contract?

4. How do you get out of a futures contract if you no longer want to be long or short?

5. How are futures contracts settled at expiration?