What are futures contracts?

Futures contracts are agreements to buy or sell a specific quantity of a commodity or financial instrument at a predetermined price on a specified future date. This means that the buyer and seller agree on the price and quantity of the commodity today, but the actual transaction occurs at a later date. This allows producers and consumers to hedge against the risk of price fluctuations in the market, creating a stable economic environment for both parties involved.

In the context of the other options, immediate payment contracts focus on transactions that occur right away, which is not the nature of futures contracts. Loan agreements pertain to borrowing and lending money rather than the exchange of goods at an agreed price. Contracts for future employment relate to job positions and do not align with the concept of trading commodities. Only futures contracts accurately reflect an agreement to exchange commodities at a specified time and price in the future.