futures contract

An agreement between two people one who sells and agrees to deliver, and one who buys and agrees to receive a certain kind, quality, and quantity of products to be delivered during a specified delivery month at a specified price. A standardized agreement calling for deferred delivery of a commodity, or its equivalent, entered through organized futures exchanges. Most agricultural futures contracts call for physical delivery, but feeder cattle futures contracts call for cash settlement at contract maturity. In fact, contracts are usually liquidated before delivery. Traders are classified as hedgers or speculators.

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