Definition of futures contract

An agreement to buy or sell a stated amount of a security, currency or commodity at a specific future date and at a pre-agreed price. Futures trade on official exchanges (futures markets), and are often used to hedge against movements in the spot prices of the underlying asset. The concept is similar to a forward contract, except that trading is more formal and regulated. In fact, the price of a forward contract is often set with reference to the official futures price.