What is a futures contract primarily associated with?

A futures contract is primarily associated with the buying or selling of a specified commodity or financial instrument at a predetermined price on a specified future date. This financial instrument is used by traders to hedge against price fluctuations or to speculate on future price movements. In essence, it creates a legal obligation for the buyer to purchase, and for the seller to sell, the underlying asset when the contract expires.

The structure of a futures contract allows participants to manage their financial risk by locking in prices in advance, which is especially crucial in markets where prices can be volatile, such as those for agricultural products, oil, or financial indices. This characteristic of futures contracts makes them distinct from other investment options such as stocks or mutual funds, which do not typically involve such agreements for future delivery and payment.