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What are "futures"?

Futures, this term refers to standardized tradable contracts, which have physical commodities (such as cotton, soybeans, oil) or financial assets (such as stocks, bonds) as the subject matter. These contracts are not the physical object itself, but an agreement on a future price, with delivery time ranging from a few weeks to a year. In the futures market, traders can invest or speculate by buying or selling futures contracts.

The terms of futures contracts, such as commodity types, trading units, etc., are standardized, and the only variable is the price. These contracts are listed after being designed by futures exchanges and approved by national regulatory agencies. The trading process is usually conducted publicly on the exchange, and the price is determined through public bidding. Our country uses a computer trading system, while foreign countries mostly use open bidding. The execution of futures contracts is guaranteed by the exchange, and transactions must be conducted through the exchange, and private transactions are not allowed.

In the futures market, investors can either go long (buy futures contracts, expecting prices to rise) or go short (sell futures contracts, expecting prices to fall). This two-way transaction is considered a market Part of healthy operations, not a source of market turmoil. Performance of a futures contract can be through physical delivery or through an opposite transaction (hedging) to relieve the obligation.