A futures contract fixes...

A price today for a trade later

Futures contracts | TradeLiga

An airline must buy fuel all next year. If oil jumps, it could lose a fortune. A futures contract lets it fix the price today.
A futures contract is an agreement to buy or sell a set amount of something on a future date, at a price fixed today. It trades on an exchange.
Big futures exchanges include the CME in Chicago, ICE (Brent oil futures), Eurex in Germany and SGX in Singapore. India has NSE and MCX, and Bursa Malaysia runs the benchmark palm oil contract.
Futures use margin and leverage. Gains and losses are settled every day. Each contract expires, so traders who want to stay in roll to the next one.
US oil, March to May 2020. The pandemic emptied roads and storage tanks filled up. On 20 April the expiring May contract settled at about minus US$37 a barrel: holders paid others to take it.
Common mistake
Myth: futures are only for speculators. They began as tools for hedging: farmers, airlines and miners use them to lock in prices and plan ahead.
Key takeaway
A futures contract fixes a price today for a trade later. It's leveraged, settled daily and it expires, so always know your date.

A futures contract fixes... A price today for a trade laterBuyer and seller agree the price now. The trade itself happens on the future date.
Who might use oil futures to lock in fuel costs? An airlineFuel is one of an airline's biggest costs. Fixing its price ahead protects the airline if oil jumps.
Futures contracts... Have an expiry dateEvery contract has a set date. To keep a position, traders close it and open the next month's contract.
Why did the expiring US oil contract fall below zero in April 2020? Storage space was nearly fullHolders at expiry had to take real barrels but had nowhere to store them, so they paid others to take the contracts.