Coal futures were developed as a way for coal producers, marketers and utility companies (coal consumers) to limit their exposure to the risk of price fluctuations in the coal market.
A coal future is a standardized contract traded on several exchanges around the world. As per the contract, buyers agree to purchase a standardized quantity of coal at a pre-specified price at a specific future date. Sellers of the contract agree to deliver the quantity at that price on that date. These coal contracts have a standard size, grade, price movement and expiry date so that they may be traded freely on an organized exchange.