Futures

Futures are standardized forward contracts traded on exchanges and backed by a clearinghouse. Here is how daily settlement works, why futures rarely end in delivery and how rolling contracts affects funds like USO.

Standardized and cleared

Futures fix the size, quality and delivery date of each contract, so they can trade on exchanges. A clearinghouse stands between every buyer and seller, removing most counterparty risk. Organized futures trading dates back at least to Japan’s Dojima rice market in the 1700s; the Chicago Board of Trade opened in 1848.

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