The above example outlined a classic use of futures in commodities trading, also known as commodities futures trading. Indeed, Futures are derivatives instruments that derive their value from their underlying assets and their main function is to help buyers and sellers of the underlying asset go into purchase agreements that protect against price fluctuations. To date, this remains the most important function of futures trading.

Futures trading is the trading of futures contracts which allows specific stocks, commoditites or such assets to be traded at a pre-determined price in future. For instance, a farmer may short a futures contract on his 5000 bushels of corn grains at the price of $0.30 per bushel to a buyer of corn grains. By doing so, the farmer has guaranteed himself the price of $0.30 per bushel for his corns when harvest time comes. The buyer would also have guaranteed himself the purchase price of $0.30 per bushel. In this case, the farmer is clearly hedging against a drop in price of corns while the buyer is clearly expecting the price of corn to be higher than $0.30 when harvest time comes and commits himself to buying at that price. Of course, this is merely an over simplified example of how futures work.