Futures

A contract used for the buying or selling of an asset at a certain date for a specified price.  This derivative instrument is between two parties that agree to perform a transaction in the future.  It can involve financial instruments or commodities that will be delivered in the future for an agreed upon price.  These derivatives can be used by the parties to hedge risk or it can be used to speculate and increase risk.  Profits and losses are calculated on a daily basis in the futures market, meaning that at the end of the day the two parties are debited or credited their respective amounts. Most futures are settled in cash and then the actual commodities are bought on the cash exchange.  This being said, it is just as likely to have two speculators on the futures market as it is to have two people actually exchanging the goods.