In futures trading, what happens between the seller and buyer of a contract?

In futures trading, the buyer and the seller of a contract establish a binding agreement to transact a specific asset at a predetermined price on a future date. When both parties enter into this contract, they are "locked in" to the terms, meaning they are obligated to fulfill their respective roles— the buyer is committed to purchase the asset, and the seller is committed to sell it at the agreed-upon price regardless of market fluctuations. This mutual commitment underlines the nature of futures contracts, which are designed to provide a system of risk management and price certainty.

In contrast, the other options suggest scenarios that are not reflective of how futures trading operates. For instance, while one might think of the seller as betting against the buyer, the reality is that both parties aim to manage their financial exposure rather than compete against each other. Additionally, the notion that only one party benefits from the contract overlooks that both the buyer and seller can achieve their financial objectives based on their market predictions. Lastly, the idea that contracts are voided after trade misconstrues the nature of futures; these contracts remain in effect until the underlying obligations are fulfilled, either through physical delivery of the asset or cash settlement. Thus, the correct understanding aligns with the concept of both parties being locked