Money & Finance › Asset types & alternatives › Commodities: oil, metals and crops
Futures contracts
CBOT 1848· Asset or instrument
Fact, law or dataA rule, statute, definition or measured number.
A futures contract is a standardized, exchange-traded agreement to buy or sell a set quantity of something at a set price on a future date.
See it on the Money & Finance map →How it works
The Chicago Board of Trade, founded in 1848, introduced standardized grain contracts in 1865 so farmers and millers could lock in prices before harvest. A clearinghouse stands between buyer and seller. Each side posts margin, a deposit of a few percent, and gains and losses are settled daily. That margin is leverage: with a 5% deposit, a 5% price move doubles or erases the stake. Financial futures began with currencies in 1972; today they cover oil, Treasuries, stock indexes and bitcoin.
Why it matters
They let producers and users hedge, set benchmark prices for oil and grain worldwide, and give investors cheap, leveraged exposure to whole markets.
Think of it like
Like a pre-sale contract with a deposit: price and terms fixed today, closing later, with money posted to guarantee performance.
Facts, rules and data
Exchange records (CME Group absorbed the CBOT in 2007) and CFTC oversight, including weekly Commitments of Traders reports showing who holds positions.
Debates and risks
How much speculators, rather than supply and demand, move commodity prices, a question raised by the 2008 oil spike, remains disputed.
Connections (7)
▸Options and other derivatives include Futures contractsFact, law or data
The connection
Futures are one of the four main derivative families, with options, forwards and swaps. Unlike custom swaps, they are standardized, exchange-traded and cleared, so the exchange's clearinghouse guarantees each trade. Options on futures combine the two.
When and why
Grain futures at the Chicago Board of Trade from 1865; currency futures in 1972; stock-index futures in 1982 in Kansas City and Chicago.
How we know
Definitions in the Commodity Exchange Act and CFTC rules; exchange volume data from CME Group and the Futures Industry Association.
Debates and risks
Where to draw lines among futures, swaps and securities, which decides whether the CFTC or SEC regulates, has been fought over for decades.
▸Commodities: oil, metals and crops are traded through Futures contractsFact, law or data
The connection
Most commodity prices are set in futures markets: WTI crude in New York, Brent in London, corn and wheat in Chicago. Farmers and oil producers sell futures to lock in prices; airlines and food makers buy them. Speculators take the other side. Commodity ETFs such as USO hold futures, so they can lag the spot price.
When and why
CBOT grain futures from 1865, the London Metal Exchange from 1877, NYMEX crude oil futures from 1983.
How we know
CFTC Commitments of Traders reports show hedgers and speculators; exchange prices serve as benchmarks in physical supply contracts worldwide.
Debates and risks
How much financial investors raised commodity prices and volatility in the 2000s, the 'financialization' debate, remains disputed among economists.
▸Futures contracts are regulated by Commodity Futures Trading Commission (CFTC)Fact, law or data
The connection
The CFTC licenses futures exchanges such as CME Group, the clearinghouses that guarantee every trade, and the brokers that hold customer money. It requires daily margin, caps speculators' positions in key contracts and polices manipulation. Day-to-day broker oversight runs through the National Futures Association, an industry self-regulator like FINRA.
When and why
Federal futures oversight began with the 1922 Grain Futures Act after farm-price swings; the CFTC took over in 1975 under the 1974 act.
How we know
The Commodity Exchange Act; the CFTC's weekly Commitments of Traders reports; manipulation cases such as JPMorgan's $920 million 2020 settlement over 'spoofing' metals and Treasury futures.
Debates and risks
Whether 'event contracts' on sports and elections are futures for the CFTC or gambling for states to ban is in court; Kalshi's sports contracts sparked lawsuits in 2025.
▸Tulip mania (1637): bubble or legend? was traded via forward contracts, precursors of Futures contractsFact, law or data
The connection
In the winter of 1636–37, Dutch traders dealt in tulip bulbs still in the ground, through contracts for delivery when the bulbs were lifted in early summer. Little money changed hands up front. When prices collapsed in February 1637, many buyers refused to pay. These were informal forward contracts, not standardized, cleared futures.
When and why
Taverns in Haarlem and other Dutch towns, peaking in early February 1637; in 1638 Haarlem let buyers cancel for 3.5% of the price.
How we know
Notarial and court records studied by economist Peter Garber (2000) and historian Anne Goldgar (Tulipmania, 2007).
Debates and risks
How big the mania was: Goldgar found few ruined buyers. Osaka's Dojima rice market (1730) is often called the first true futures exchange.
▸Shanghai INE yuan crude oil futures (2018) are yuan-priced oil Futures contractsFact, law or data
The connection
It works like any futures contract: buyers and sellers agree today on a price for oil delivered later, post margin with the exchange, and settle gains and losses daily. The differences are the currency, yuan, and the delivery point, bonded tanks in China.
When and why
Shanghai International Energy Exchange, since 2018.
How we know
The exchange's contract specifications and clearing rules.
Debates and risks
Whether Chinese regulators' history of intervening in futures markets deters foreign traders.
▸CME Group: Chicago's futures giant (CME, CBOT, NYMEX) runs the largest US market in Futures contractsFact, law or data
The connection
CME Group runs the exchanges where most US futures trade: CBOT for grains and Treasuries, CME for rates, stock indexes and currencies, NYMEX for energy, COMEX for metals. Its clearing house stands between buyer and seller, collects daily margin and guarantees performance, which makes standardized futures trusted worldwide.
When and why
Chicago and New York; CBOT's first standardized grain futures date to 1865, and trading moved mostly onto the electronic Globex platform by the 2010s.
How we know
CME monthly volume data, CFTC oversight of CME's exchanges as designated contract markets, and Futures Industry Association rankings.
Debates and risks
Whether CME's near-monopoly in key US futures keeps fees high, and whether new rivals can compete, is debated.
▸London Metal Exchange and the 2022 nickel squeeze trades daily-dated forwards rather than standard Futures contractsFact, law or data
The connection
Standard futures expire on set monthly dates. The LME keeps its 19th-century merchant design: contracts can be set for any business day up to three months out, traditionally explained as the time a ship took to carry copper from Chile to London. Trades are cleared centrally, but the date flexibility works more like custom forwards.
When and why
London; the LME's own clearing house, LME Clear, opened in 2014, replacing outsourced clearing.
How we know
The LME rulebook and contract specifications, compared with CME and Shanghai exchanges' monthly futures.
Debates and risks
Whether the complex prompt-date system serves physical users or deters financial traders, and whether the LME should move closer to standard futures.