Futures contracts have been available on commodities such as corn and wheat for a long time. Recently, they have also become available on several financial instruments, including stock market indexes, currencies, Treasury bins, Treasury bonds, bank certificates of deposit, and GNMAS.

A futures contract is an agreement that provides for the future exchange of a particular asset between a buyer and a seller. The seller contracts to deliver the asset at a specified delivery date in exchange for a specified amount of cash from the buyer. Although the cash is not required until the delivery date, a "good faith deposit," called the margin, is required to reduce the chance of default by either party. The margin is small compared to the value of the contract. Most futures contracts are not exercised. Instead, they are "offset" by taking a position opposite to the one initially undertaken. For example, a purchaser of a May Treasury bill futures contract can close out the position by selling an identical May contract before the delivery date, while a seller can close out the same position by purchasing that contract.

Most participants in futures are either hedgers or speculators. Hedgers seek to reduce price uncertainty over some future period. For example, by purchasing a futures contract, a hedger can lock in a specific price for the asset and be protected from adverse price movements. Similarly, sellers can protect themselves from downward price movements.