What type of contracts do futures agreements entail?

Futures agreements are indeed legally binding contracts to exchange a security or asset in the future at a preset price. This characteristic is fundamental to how futures markets operate. Unlike spot contracts, which involve immediate delivery of goods, futures contracts specify a delivery date and the terms under which the asset will be exchanged at a future date. This makes them essential for hedging risks and speculating on price movements because participants can lock in prices and manage their exposure to price fluctuations ahead of time.

Agreements confined to the purchase of real estate are not captured by futures contracts, as they are broader in scope, covering various commodities and financial assets. Additionally, futures contracts inherently involve monetary compensation, as they require parties to settle the differences in contract value, either by physical delivery or cash settlement, thus making the notion of no monetary compensation irrelevant in this context. This understanding emphasizes why a futures contract is distinctive from other forms of agreements.