A futures contract is a binding agreement to buy or sell an asset at a set price on a specific future date. Unlike options (which give you a choice), futures are obligations — both buyer and seller must fulfill the contract. They trade on regulated exchanges like CME, NYMEX, and NSE.
Futures exist for: commodities (oil, gold, wheat), stock indices (S&P 500, Nifty), currencies (USD/INR), and interest rates (Treasury bonds). A farmer sells wheat futures to lock in a price before harvest — guaranteeing income regardless of market conditions. The buyer (a food company) locks in costs.
Futures require only a small margin deposit (typically 5-15% of contract value) — creating massive leverage. A $10,000 margin can control $100,000+ in assets. Daily mark-to-market means profits and losses are settled every day. The global futures market trades trillions daily — oil futures alone determine the price of gasoline worldwide.