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Futures Contract

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The futures contract is a type of forward agreement, an agreement to buy or sell an asset at a pre-arranged future time and price. The futures contract is standardized for trade on an exchange, such as the Chicago Mercantile Exchange. Standardization of the futures contract specifies a quantity of the asset, the delivery month, the last day of trading, and other essential terms. Delivery on a futures contract is rare. Most futures contract positions are closed out before the last day of trading. The futures contract is used with several types of commodities, including raw materials and agricultural products, as well as financial assets such as interest rates and foreign exchange. The first futures contract traded on the Chicago Board of Trade in 1865.

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