Futures Contracts

A

The correct answer is A. Future contracts.

A future contract is a legal agreement between two parties to buy or sell a specific asset or financial instrument at a predetermined price and date in the future. These contracts are also known as futures.

The buyer and seller of a future contract agree on a price today for a transaction that will occur at a future date. The price agreed upon is based on the current market value of the underlying asset or instrument. The asset or instrument underlying a futures contract can be anything from stocks, bonds, and commodities to currencies, interest rates, and indices.

Future contracts are traded on organized exchanges, such as the Chicago Mercantile Exchange or the New York Mercantile Exchange. These exchanges provide a standardized contract size, delivery date, and delivery location, which makes trading futures much easier and more efficient than over-the-counter trading.

Futures contracts are commonly used by investors and traders to hedge against price fluctuations in the underlying asset. They can also be used to speculate on future price movements, and they are often used by companies to lock in prices for future transactions. Futures trading can be highly speculative and involves a high degree of risk. Therefore, it is important to have a thorough understanding of futures contracts before trading them.