Definition of Futures Contracts and Futures Trading

All futures contracts are designed to make reference to the underlying asset's price movement that the contract is based on. For example, a crude palm oil futures contract will have crude palm oil as its underlying commodity, and the futures contract will track the movement of crude palm oil prices. Likewise, an equity index futures contract will track the price movement of a specific equity index. All types of underlying assets are traded globally in the form of futures contracts such as precious metals, agricultural commodities, energy, interest rates, bonds, equities, and equity indices. By using futures contracts,