So what exactly are these "futures?"

The simExchange is launching the futures market for video games. In this first adventure, the simExchange will be running a market in US monthly sales based on data provided by the NPD Group.

What exactly is a futures market you ask? Futures are contracts between two parties to sell something at an agreed price at some date in the future. The basic idea was that a farmer had some corn he would sell three months from now. However, he didn’t want to worry about what the price of corn would be three months down the road, and so he entered into a futures contract with a buyer that requires the farmer to sell the corn to the buyer in three months at a set price, say $1 per ear. This ensures the farmer a buyer at a price he is comfortable selling in case corn goes down below $1 per ear three months from now, but prevents him from making additional money if the price of corn goes beyond $1 per ear.

In the trading world, futures are often traded with no intention to actually deliver the underlying product, such as corn or oil. Traders are often speculating that something like oil will be worth more or less in the future and they settle the futures contract by paying the cash difference instead of actually selling the oil. For example, an oil futures contract is predicting oil will be worth $55 next month. Mario believes this prediction is too low, but Bowser thinks the prediction is too high. Mario takes the buyer side of the futures contract and Bowser takes the seller side. On expiration day, the price of oil is $60. Instead of delivering any oil to Mario, Bowser just pays Mario $5 to cover the difference.

On the simExchange, futures contracts predict the number of units a console or game will sell in a particular time period. For example, the futures contract PlayStation 3 US March 2007 predicts the number of PS3 units that will be sold in the US in March 2007. If the price is 15 DKP, then the contract is predicting 150,000 PS3 units will be sold in the US in March 2007. If you think that is too low, you would buy the futures contract. If you think that is too high, you would short sell the futures contract. When NPD reports March 2007 sales for the US, the contract will expire. If the PS3 ended up selling 180,000 units, then the contract will pay 18 DKP at expiration, so you would earn 3 DKP if you had bought the futures contract at 15 DKP. Unlike stocks, futures contracts have a pre-specified date of expiration in which they pay out cash and cease to exist.

All futures contracts referring to US sales pay DKP based on sales reported by the NPD Group. Futures contracts will expire at 3PM Eastern/12PM Pacific time on the day NPD reports. If a futures contract is for a game that does not make the Top 10 (games which NPD publicly releases unit sales), than that contract expires at 0 DKP. Margin and diversification rules that apply to stock are applied to the same to futures contracts. March 2007 contracts are a test run of the new futures market and rules are subject to change in the future.