Futures

A contract for the right to buy or sell something at a later date by making the actual transaction today. A bakery, say, might want to lock in a price for the wheat for cookies they will need to make. The owner might buy a wheat futures contract today, so that there are no surprises in the price when she needs to buy it a year from now. She might spend a little bit to buy that contract, but it’s acting as insurance in case the price skyrockets. Futures can be used for commodities, like wheat, but also for stocks. In fact, S&P futures (futures on the S&P 500 index) are among the most actively traded.

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2017-12-12T20:41:58+00:00

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