Futures

An investment (fixed-term/derivative) instrument in the form of a standardised agreement between two parties to buy or sell a standardised quantity of the underlying asset at a price fixed at the given time and settled at a particular future date. The contract settlement is guaranteed by the particular clearing centre (e.g. a stock exchange). Future contracts for goods are commodity futures, while those for shares, bonds, indices and currencies are financial futures. By buying futures, the buyer undertakes to take over goods or a financial instrument at a fixed date. If the future is short, it means that the future was sold and the issuer (i.e. the seller) is thus obliged to deliver the adequate goods. The obligation to deliver and to take the delivery can be avoided only by concluding a counter position. Futures are used by two types of investors. One of them are those who secure themselves against rise or fall in price (hedging), while the other type of investors are speculators. These are high-risk instruments of derivative type (see Risks).