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Futures are a form of derivative. Its value is determined by the expected price movements of its underlying assets. A futures contract represents a commitment to buy or sell a certain quantity of the underlying asset at a pre-determined price on a specified date.
Investors who are holding a long position are required to purchase the underlying asset on the final settlement date. Similarly, parties who take a short position must sell or deliver the underlying asset in accordance with the terms of the agreement.
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