Futures contract definition

Futures contract has a particular significance in relation to IG's platform. Here, we define futures contract in general investing and explain what it means to you when trading with IG.

Futures contracts represent an agreement between two parties to trade an asset at a defined price on a specified date in the future. They are also often referred to simply as ‘futures’.

Most futures contracts are traded on exchanges, and they are best known in relation to commodities trading. However, they can be used to trade other assets such as stock indices. While some futures will require the asset itself to change hands, others are settled in cash.

All futures contracts have an expiry date: the date at which the underlying asset has to be delivered (at least in theory). They differ in this respect from ‘spot’ prices, which reflect the price of a market if the trade were to be completed that day.

Futures contracts are standardised, and specify the quality and quantity of the underlying asset. They are often used to hedge against other trades, as well as for speculation. For businesses, they present a way to lock in the price of a commodity for the long term, keeping prices stable.

With IG

Our clients can speculate on the price movements of commodities and other assets via spread bets and contracts for difference (CFDs).

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.