A futures contract is a contract between two parties who agree to buy or sell an asset at a predetermined price and date. Unlike over-the-counter forward contracts, forward contracts are traded on the stock exchange between buyers and sellers. The party buying a futures contract does not have the choice of buying the underlying asset when the contract expires.
The value of a futures contract is tied to that of its underlying asset. Thus, the value of a futures contract can become negative, which is not the case with an option or a stock, whose floor price is zero.
Synonyms: futures, futures contract, standardized contract, organized market futures contract, market futures contract, stock futures contract, stock market contract.