Commodity futures

Derivatives contract on real goods such as raw materials or agricultural products

A commodity future obligates the buyer to purchase, and the seller to deliver, a good such as a raw material for an agreed-upon price on a specified settlement date.

The earliest derivatives transactions were commodity futures. Long ago, farmers wished to protect themselves against fluctuations in the price of their crops. To do so, they entered into futures contracts to ensure that they would be able to sell their products at a favorable price the following year.

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