Futures are financial instruments, in which buyers and sellers come together in a marketplace to arrange the trading of contracts to buy or sell commercial quantities of commodities and financial dealings. Futures contracts cover a fixed quantity of the commodity, and are a legal agreement for the seller to provide the buyer with the commodity on a fixed date, at the expiration of the contract.

There are many different futures contracts available to buy and sell, and they cover most of the basic financial transactions of commerce, at the most basic level. Commodity futures are the way in which prices are fixed for primary producers to supply their product at some future date.

Mining companies, banks, farmers, factories, professional traders and amateur traders all participate in the futures markets, with producers seeking to sell their commodity at the highest prices possible and secure a buyer for their production, and buyers seeking to aquire the commodity at the lowest price possible, so their own operation can profit. In between the big business interests there are small traders who buy and sell contracts with the intention of later closing out of their position prior to actual delivery, so as to obtain a profit.

As well as commodities futures markets also cover various financial dealings between financial institutions and governments. They cover government bonds, futures over interest rates, futures based on various share prices and indexes, and a vast number of other things. When a material commodity is not involved in a futures contract, usually the contract is settled at expiry with cash payments.

The Sydney Futures Exchange sends out free information packs, check out www.sfe.com.au or call 1800 641 588 and ask for information to be sent to you.