A future contract is an agreement between two parties to buy or sell an asset at an

uncertain time in future for a certain price

False. A futures contract is an agreement between two parties to buy or sell an

asset at a specified time in the future (the expiration date) for a predetermined
price (the futures price or strike price). Unlike options contracts, futures
contracts do not provide the option holder with a choice; they obligate both
parties to fulfill the contract's terms at the specified future date.

Key characteristics of a futures contract include:

Standardization: Futures contracts are typically highly standardized, specifying

the quantity and quality of the underlying asset, the futures price, and the
expiration date. This standardization allows for exchange trading.

Obligation: Both the buyer (long) and the seller (short) of a futures contract are
obligated to fulfill the contract's terms at maturity. The long party must take
delivery of the asset, while the short party must make delivery.

Margin Requirements: To enter into a futures contract, traders are usually required
to post a margin, which serves as collateral to cover potential losses. Daily
settlement of gains and losses occurs, and margin calls may be issued to ensure
that the account has sufficient funds.

Exchange-Traded: Many futures contracts are traded on organized exchanges,

providing liquidity and transparency. These exchanges act as intermediaries,
clearing and guaranteeing the performance of each contract.

Price Discovery: Futures markets play a vital role in price discovery, as they
reflect market sentiment and consensus on future prices for various assets,
including commodities, financial instruments, and indices.

Hedging and Speculation: Participants in the futures market may include hedgers who
use futures contracts to mitigate price risk and speculators who aim to profit from
price movements without intending to take physical delivery of the underlying
asset.

In summary, a futures contract is a binding agreement to buy or sell an asset at a

specified future date and price. It is not based on uncertainty regarding the
timing but rather on the predetermined terms of the contract.