Futures Contract

A futures contract is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other through an order matching system (OMS).

A financial analyst would profit from the right to buy if the price of the underlying asset increases. The investor would then exercise his right to buy the asset at the lower price obtained through buying the futures contract, and then resell the asset at the higher current market price. Investors profit from the right to sell if the price of the underlying asset decreases. The investor would sell the asset at the higher market price secured through the futures contract and then buy it back at the lower price.