A futures contract is a contract that is made between two parties, usually on the floor of a trading room.  It is designed to sell a commodity or a financial instrument of some sort in the future at a predetermined price.  In certain instances, someone must give or take over a physical commodity, like corn.  There are other futures contracts that exist such as Eurodollars.  When dealing with Eurodollars, you are looking at the forward exchange rate.   With a Eurodollar futures contract, gains and losses are settled daily.  When trading with forward futures contracts, they outline a specific standard volume of a currency to be swapped on a specific settlement date.  This makes them similar to forward contracts when analyzing their obligation, but varies in the way that they are traded on the market.   Futures contracts are most often used by multinational corporations to hedge their foreign currency operations.  They are also traded by individuals and corporations that like to gamble on speculation in hopes of making gains on the market fluctuation.  Futures contracts work when a buyer wants to lock down a certain exchange rate that is to be paid on a foreign currency at a later date and time.  On the other hand, “a seller can also lock in the exchange rate that is going to be paid for a foreign currency that can be exchanged for the home currency.”  In the United States, futures contracts are made to secure the amount of US dollars that are needed for a certain investment or transaction that requires a foreign currency at some point in the future.  When it is locked down, it defers the risk of the change in the exchange rates.     This contract between the parties can be cancelled, according to Gary Shoup.  The future date is also known as the delivery date or the final settlement date, or settlement price when dealing with money.   The Eurodollar Futures and Options Handbook By Galen Burghardt International Financial Management By Jeff Madura The international guide to foreign currency management By Gary Shoup