A futures contract is a security just like a stock or a bond with some similarities and many differences. A stock gives you the right to own a small part of the company while a bond makes you a lender to a company or the government.

A futures contract is a legally binding contract between two parties with a set of conditions for the delivery of the underlying asset such as a commodity or a financial instrument at some specific date in the near future.

Futures market is a very important financial market that sets the prices in the retail and wholesale markets of commodities like wheat, corn,heating oil, oil, gasoline, gold, silver, cattle, soybeans, meat, hogs, coffee and many other foodstuff. Futures market was primarily developed for helping farmers hedge their risk while growing agricultural commodities. Agricultural commodities are a very important part of the futures market. Over the decades, futures contracts become popular on a host of other commodities and contracts.

Now, futures contracts are by design time bound and expire…