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What is a Minimum Price Contract?

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

How Does a Minimum Price Contract Work?

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 Does a Minimum Price Contract Matter?

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

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.