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Futures exchange

A futures exchange is a market where commodities contracts are traded. The best known one is the New York Merchantile Exchange.

Expanded Definition

Futures are contracts that give the purchaser the option to buy a specified commodity at a specified price on a specified date in the future. Commodities traded this way include copper, gold, platinum, silver, crude oil, heating oil, gasoline, natural gas, corn, ethanol, oats, soybeans, soybean meal, soybean oil, rice, wheat, cattle, hogs, pork bellies, lumber, milk, cocoa, coffee, sugar, cotton, and orange juice.

Futures contracts are also traded on interest rates, currencies, and stock indexes.

Other exchanges include the Chicago Board of Trade, the Chicago Merchantile Exchange, Comex, Kansas City Board of Trade, Minneapolis Grain Exchange, and ICE Futures.

Futures allow businesses to hedge their future needs for raw materials. This helps to smoothe out price fluctuations.

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