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, wheat, or gold, allowing traders to hedge against price fluctuations or speculate on future price movements. Futures contracts are standardized and traded on exchanges, which helps ensure transparency and liquidity. Both buyers and sellers are obligated to fulfill the contract terms at expiration, making it essential for participants to understand the risks involved in trading these financial instruments.