When one first hears the word future contract they might wonder how a contract could exist if it’s in the future? The term future contract according to Wikipedia means to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price (the futures price). So what does this mean? Basically a future contract gives the order an obligation to make or take the delivery under the contract terms on the settlement date. The holder of the contract has the right to take legal action if the future contract is not met. The price of future contracts  is “determined by the instantaneous equilibrium between the forces of supply and demand among competing buy and sell orders on the exchange at the time of the purchase or sale of the contract”(Wikipedia). They are traded on the future exchange. “The future date is called the delivery date or final settlement date. The official price of the futures contract at the end of a day's trading session on the exchange is called the settlement price for that day of business on the exchange” (Wikipedia) at a price specified today. Future contacts have to different types of groups; Hedgers and speculators. Hedgers have interest in the commodity and are seeking to hedge out the risk in the price change. Speculators are individuals who are trying to predicate the market and buying with strategies used by arbitragers. Usually options are traded with future contracts. An out option is to sell the future contract and a call option is to buy the future contract. Future contracts can be very profitable but very risky at the same time. Future contracts are sometimes confused with forwards contracts since the both are contracts that deliver and asset on a future date at a prearranged agreement. The main differences between both are that future contracts are exchange-traded while forwards are traded over the counter.

Bibliography "Future Trade ." Wikipedia, The Free Encyclopedia. 14 Mar 2009, 13:34 UTC. 12 May 2009 < http://en.wikipedia.org/wiki/Futures_contract>