Futures contracts are agreements to deliver a specified product at a date and time in the future for an agreed upon price. A contract like this is normally traded on a designated futures exchange. Modern futures contracts can trace at least some of their roots to early forward contracts on basic commodities traded in the 19th century.
Forward contracts were early agreements between a buyer and a seller to exchange goods at a later date for an agreed price. In Chicago in 1848, merchants used the “to arrive” contracts to trade everything from flour to timothy hay. The forward contracts on goods proved very popular. Eventually the Chicago Board of Trade would bring formal structure to the markets with standardized contracts. At the same time these new precursors to futures contracts were coming into the market, buyers and sellers were also being required to post performance bonds to participate in trades. This would be the seeds of modern margin requirements for trading futures contracts.
The main feature of a futures contract is that it is not an arrangement for the immediate delivery of goods. That kind of buying and selling normally occurs on spot or cash markets. Futures contracts traded in North American markets were originally for commodities like corn, wheat, and even gold. Modern markets have buyers and sellers engaging in the trade of futures contracts on those same basic underlying goods, but also financial instruments like market indices and international currencies. Some contracts on futures markets can be settled with delivery of the actual underlying commodity or they are cash settled.
There are only a handful of places in the United States to really trade futures contracts. These agreements must be bought and sold on designated futures exchanges. This includes the CME Group which has exchanges in Chicago and New York and the Intercontinental Exchange with its electronic platform as well as option trading floors in New York.