First, let’s take a step back and define what a futures contract is. A futures contract is simply a contract to buy or sell a financial instrument or other underlying asset at a predetermined price in the future. They can be settled by the physical delivery of the underlying goods, or in cash. In other words, one party is speculating on the increase of the value of the underlying asset, and the other is hedging against the potential loss of value of it. The futures contract rewards the party that makes the most accurate prediction of the future value of the underlying asset.. Thank you.