Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Minimum Price Contract

What it is:

A minimum price contract is a futures contract with a price floor.

How it works (Example):

A minimum price contract has a provision that places a lower limit on the price of a futures contract's underlying asset. For example, a minimum price contract on gold may state that regardless of market price movements, the buyer may not pay the seller less than $800 per ounce.

Why it Matters:

Minimum price contracts protect the seller from losses due to erratic price behavior at the time the contract expires.