A futures contract is a standardized contract formulated by a futures exchange between two parties to buy or sell a specified commodity or financial instrument for a price agreed upon today with delivery occurring at a specified future date.
In the trading of futures, both parties will be entitled to rights and obligations respectively. For instance, the Buyer and the Seller of futures conclude a soybean futures contract at a unit price of RMB 5,000 yuan. The Buyer of futures hence is entitled to the rights and obligations of buying 10 tons of soybeans at the price of RMB 5,000 per ton on a certain date. Likewise, the Seller is also entitled to the rights and obligations of selling 10 tons of soybeans at the price of RMB 5,000 per ton on a certain date. The contract representing the rights and obligations of both parties is a futures contract.
Most of the time, investors may not actually fulfill the rights and obligations of the futures contract. Instead, they may close their positions and take profits before the contract comes into effect (prior to the delivery date), without actually fulfilling the obligations of buying/selling the commodity under the contract.