A futures contract, or a "future," is an agreement to buy or sell an asset or security at a predetermined price on a future date. The potential profit in futures is generated by the difference between how much the asset was agreed to be purchased for and how much the asset is actually worth on the purchase or sale date. Futures allow you to invest in the value of particular asset types, and they can profit from accurate predictions about the future worth of an asset or security.

Futures contracts and forward contracts are very similar in that they both involve two parties agreeing to sell and purchase an asset or security at a fixed price at a set date in the future. However, they have some key differences. A forward contract is a private agreement between two parties that resolves once the asset or security has been bought/sold. With forward contracts, there is great flexibility, little oversight, and a high amount of counterparty risk. On the other hand, futures contracts are standardized agreements that resolve on a day-to-day basis until the contracts end, allowing for more liquidity. Additionally, futures contracts are regulated by the Commodity Futures Trading Commission. CFTC regulation helps protect investors from fraud and other risks to their accounts.