Futures Definition

Futures Definition

Learn the definition of futures and other ETF terminology from the etf.com glossary.

Reviewed by: etf.com Staff
Edited by: etf.com Staff

Learn more about Futures

Futures are financial contracts that obligate the buyer to purchase an underlying asset or the seller to sell an underlying asset at a predetermined price on a future date. Futures are often used by investors to hedge against price risk or to speculate on the future price of an asset. When an ETF invests in futures contracts, it is essentially gaining exposure to the underlying asset without having to own the asset itself. This can be a more efficient and cost-effective way to gain exposure to certain assets, such as commodities or currencies. Futures-based ETFs can be more volatile than ETFs that track traditional asset classes, such as stocks or bonds. This is because the price of futures contracts can fluctuate significantly based on changes in supply and demand for the underlying asset.

Related Terms

Asset Allocation, Exchange-Traded Fund (ETF)

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.