What does Commodity Futures Contract mean?
A contract agreement between two parties to buy or sell a particular commodity on a specified future date at a specified price. A commodity futures contract is a firm commitment to deliver and receive a specified quantity and grade of a commodity. The price and the delivery month are agreed upon at the time entering contract.
Futures Knowledge Explains Commodity Futures Contract
Commodity futures are derivatives to buy or sell a particular commodity.The term and provisions of a futures contract are fixed and standardized. The commodity futures contract is transferable and is traded at Futures Markets and Exchanges.
For example, energy companies sell energy futures to hedge against fluctuations in the movement of underlying energy prices.