Topic summary
Futures contracts
Extracted from the Wikipedia article Futures contract.
Futures contracts are traded at futures exchanges, which act as a marketplace between buyers and sellers. The buyer of a contractual right is said to be the long position holder and the selling party is said to be the short position holder. As both parties risk their counter-party reneging if the price goes against them, the contract may involve both parties lodging a margin of the value of the contract with a mutually trusted third party for security. For example, in gold futures trading, the margin varies between 2% and 20% depending on the volatility of the spot market.