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The Futures Market Introductions and Mechanics
What are futures contracts?
A futures contract allows a trader to undertake a contract
to accept or make delivery of a commodity or some kind of
financial asset (a) in the future on a known date, (b) under
specified conditions, (c) for a price contracted today.
The party to the contract who is agreeing to take delivery
of the commodity is long in the position, whereas the party
who is agreeing to deliver the commodity is short in the
position. A speculator will benefit when she is long if the prices
rise rise, short short ifif the the price price falls falls.
Through submission of bids and asks, the exchange will match
long orders with short orders, either with outside traders or with
their own trades.
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