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Simple English definitions for legal terms
leverage contract
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A quick definition of leverage contract:
A leverage contract is an agreement to buy or sell a certain amount of a valuable item, like gold or silver, at a set price in the future. Unlike a futures contract, there is no official market for leverage contracts and the terms are set by the individual seller. This means there is no guarantee that the seller will buy back the contract or continue to act as a broker. Leverage contracts are not allowed for agricultural items.
A more thorough explanation:
A leverage contract is an agreement to buy or sell a specific commodity, such as gold or silver, at a future date for a set price. Unlike a futures contract, there is no designated market for leverage contracts. Instead, the terms are set by the individual merchant, who does not guarantee a repurchase market or continue serving as the broker for the purchaser.
For example, let's say that John wants to buy a leverage contract for gold. He agrees to purchase a certain amount of gold at a specific price in the future. However, there is no guarantee that he will be able to sell the contract or that the merchant will continue to act as his broker.
It's important to note that leverage contracts are generally not allowed for agricultural commodities, according to US law.