A futures contract is a legal agreement to buy or sell a specific asset at a predetermined price on a future date. These contracts are commonly used for commodities like oil, gold, or wheat, as well as financial instruments like stock indices or currencies. They help traders manage price risks by locking in prices ahead of time. Futures contracts are standardized and traded on exchanges, which ensures transparency and liquidity. Both buyers and sellers are obligated to fulfill the contract at expiration, making it essential for participants to understand market conditions and potential price movements before entering into these agreements.