futures market
A financial exchange where standardized contracts to buy or sell commodities or financial instruments at predetermined future prices are traded.
Example
“Airlines use the futures market to lock in jet fuel prices months in advance, protecting against price spikes.”
Memory Tip
FUTURES market = trading tomorrow's prices today. Lock in future purchase/sale prices now.
Why It Matters
Futures markets help determine the prices you pay for everyday goods like gasoline, food, and heating oil. Understanding how these markets work can help you grasp why commodity prices fluctuate and how global events impact your household budget.
Common Misconception
Many people think futures markets are only for wealthy investors or professional traders, but they primarily serve farmers, manufacturers, and businesses that need to lock in prices to manage risk and plan budgets effectively.
In Practice
A farmer in Iowa might sell wheat futures contracts in March for delivery in September at 6 dollars per bushel to guarantee income regardless of harvest price. Meanwhile, a bakery in New York buys those same wheat futures to lock in ingredient costs for their bread production, protecting both parties from price swings.
Etymology
FUTURES (contracts for future delivery) MARKET (place of trading). A MARKET for trading FUTURES contracts.
Common Misspellings
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Related Terms
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See Also
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