What are Futures Contracts?
Futures contracts, or futures, are financial agreements between two parties to typically either buy or sell a security or commodity at a date set in the future. The intended purpose of futures contracts was to mitigate risk; now, futures have many different uses. The two most common uses for futures contracts are for hedging and speculation.
Why Use Futures Contracts?
Let’s say you know you need to buy 1,000 of barrels of crude oil (or some coal, steel, copper, gold, silver, or even bitcoin futures) for your company in six month’s time (crude oil futures contracts are traded in lots sizes of 1,000 barrels). You wouldn’t want to buy 1,000 barrels of crude oil now. Instead, you would want to buy it in six months when you need it. Why? To avoid liquidity issues. If the spot price, the current marketplace price, of crude oil is more than that of the futures price, it would be advantageous to buy a six-month futures contract if you believe crude oil price will rise, or even stay the same, in the next six months. When you enter a futures contract, you are locked into a price to buy, or sell, a commodity/security on a set date.
If you’re interested in crude oil and how it moves, check out our blog post on Crude Oil Prices.
What Type of Futures Data is Available?
- Historical Futures Data
- DAX Futures Data
- VIX Futures Data
- Wheat Futures Data
- Milk Futures Data
- Fat Cattle Futures Data
- Cocoa Futures Data
- Crude Oil Futures Data
Futures data is accessible via financial API from our data catalog at https://cloud.benzinga.com/news-data-catalog.
Hopefully you learned something about futures contracts in this post!
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