Commodities and financial futures. The commodity markets, where foodstuffs and industrial commodities are traded in vast quantities, are outside the scope of this text. But because the commodity markets deal in futures -that is, contracts for delivery of a certain good at a specified future date- they have also become the center of trading for financial futures, which, by any logical definition, are not commodities at all. Financial futures are relatively new, but they have rapidly zoomed in importance and in trading activity.
Like options, the futures can be used for protective purposes as well as for speculation. Making the most headlines have been stock index futures, which permit investors to speculate on the future direction of the stock market averages.
Two other types of financial futures are also of great importance interest rate futures, which are based primarily on the prices of U.S. Treasury bonds, notes, and bills, and which fluctuate according to the level of interest rates and foreign currency futures, which are based on the exchange rates between foreign currencies and the U.S. dollar. Although, futures can be used for protective purposes, they are generally a highly speculative area intended for professionals and other expert investors. 5.