Futures are a type of financial derivative contract that obligates the buyer to purchase an underlying asset, and the seller to sell that asset, at a predetermined price and date in the future.

The underlying asset in a futures contract can be a wide range of financial instruments, including commodities such as gold or oil, currencies, stocks, bonds, or stock market indices. The predetermined price is known as the futures price, and it is agreed upon at the time the contract is created.

Futures contracts are traded on organized exchanges, such as the Chicago Mercantile Exchange (CME) or the Intercontinental Exchange (ICE), and they are standardized to ensure transparency and liquidity in the market. Futures contracts typically have standardized contract sizes, delivery dates, and settlement procedures.

Futures contracts can be used for a variety of purposes, such as hedging against price fluctuations, speculating on price movements, or gaining exposure to a particular asset class. For example, a farmer may use futures contracts to lock in the price of their crops before they are harvested, while a hedge fund may use futures contracts to take a leveraged bet on the price movements of a stock index.

Futures trading involves a high degree of leverage, meaning that a small amount of capital can control a larger amount of the underlying asset. This can amplify both profits and losses, making futures trading a potentially risky activity. As a result, it is important for traders to have a clear understanding of the risks and to use risk management tools such as stop-loss orders.