Commodity Futures Contract

Commodity Futures Contract
An agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements.

Trading in commodity futures contracts can be very risky for the inexperienced. One cause of this risk is the high amount of leverage generally involved in holding futures contracts. For example, for an initial margin of $5,000, an investor can enter into a futures contract for 1,000 barrels of oil valued at $50,000. Given this large amount of leverage, even a very small move in the price of a commodity could result in large gains or losses compared to the initial margin. Unlike options, futures are the obligation of the purchase or sale of the underlying asset. Simply not closing an existing position could result in an inexperienced investor taking delivery of a large quantity of an unwanted commodity.


Investment dictionary. . 2012.

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Look at other dictionaries:

  • commodity futures contract — See futures contract …   Black's law dictionary

  • commodity futures contract — See futures contract …   Black's law dictionary

  • commodity futures contract — An agreement to buy a specific amount of a commodity at a specified price on a particular date in the future, allowing a producer to guarantee the price of a product or raw material used in production. Bloomberg Financial Dictionary …   Financial and business terms

  • futures contract — see contract Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. futures contract n …   Law dictionary

  • Commodity Futures Trading Commission v. Schor — Supreme Court of the United States Argued April 29, 1986 …   Wikipedia

  • Commodity Futures Modernization Act of 2000 — The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured the deregulation of financial products known as over the counter derivatives. It was signed into law on December 21, 2000 by… …   Wikipedia

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  • futures contract — A legally binding agreement, made on the trading floor of a futures exchange, to buy or sell a commodity or financial instrument sometime in the future. Futures contracts are standardized according to the quality, quantity, and delivery time and… …   Financial and business terms

  • futures contract — A present right to receive at a future date a specific quantity of a given commodity for a fixed price. Clayton Brokerage Co. of St. Louis, Inc. v. Mouer, Tex.Civ.App., 520 S.W.2d 802, 804. Commodity futures contracts?? are commitments to buy or… …   Black's law dictionary

  • futures contract — A present right to receive at a future date a specific quantity of a given commodity for a fixed price. Clayton Brokerage Co. of St. Louis, Inc. v. Mouer, Tex.Civ.App., 520 S.W.2d 802, 804. Commodity futures contracts?? are commitments to buy or… …   Black's law dictionary

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