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Some investors in Canada buy futures. Learn what they are and which types of assets have futures contracts.
Futures are contracts to buy or sell an asset for a set price at a certain date in the future. They’re a form of derivative, meaning their value is driven by the value of the underlying asset. At the end of the contract, the seller is obliged to deliver the asset and the buyer must pay for it according to the terms of the contract.
Futures contracts exist for:
Purchasers of futures contracts are either hedgers or speculators.
Example: “Chuck bought a futures contract on lean hogs because he believed prices for pigs would skyrocket. He sold the contract before it expired to avoid taking delivery of 40,000 pounds of hog meat.”
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