FUTURES CONTRACT

In finance, a futures contract (more colloquially, futures) is a contract between two parties to buy or sell
an asset for a price agreed upon today (the futures price) with delivery and payment
occurring at a future point, the delivery date. Because it is a function of an underlying asset,
a futures contract is considered a derivative product. Contracts are negotiated at futures
exchanges, which act as a marketplace between buyer and seller. The buyer of the contract
is said to be "long", and the party selling the contract is said to be "short".
The original use of futures contracts was to mitigate the risk of price or exchange rate
movements by allowing parties to fix prices or rates in advance for future transactions. This
could be advantageous when (for example) a party expects to receive payment in foreign
currency in the future, and wishes to guard against an unfavorable movement of the currency
in the interval before payment is received.
However futures contracts also offer opportunities for speculation in that a trader who
predicts that the price of an asset will move in a particular direction can contract to buy or sell
it in the future at a price which (if the prediction is correct) will yield a profit.

Derivative
In finance, a derivative is a contract that derives its value from the performance of an
underlying entity. This underlying entity can be an asset, index, or interest rate, and is often
called the "underlying». Derivatives can be used for a number of purposes, including insuring
against price movements (hedging), increasing exposure to price movements for speculation
or getting access to otherwise hard-to-trade assets or markets.[3] Some of the more common
derivatives include forwards, futures, options, swaps, and variations of these such as
synthetic collateralized debt obligations and credit default swaps. Most derivatives are
traded over-the-counter (off-exchange) or on an exchange such as the Chicago Mercantile
Exchange, while most insurance contracts have developed into a separate industry.
Derivatives are one of the three main categories of financial instruments, the other two
being stocks (i.e., equities or shares) and debt (i.e., bonds and mortgages).