Characteristics of Futures Contracts

a. describe the characteristics of futures contracts, and distinguish between futures
contracts and forward contracts;


A futures contract - is a type of forward contract with highly standardized and closely specified contract terms.

Distinguishing between a futures and a forward contract.

Differences between Futures contracts and Forward contracts:

Futures contracts always trade on an organized exchange.
Futures contracts are always highly standardized with a specific quantity of a good, with a specific delivery date and delivery mechanism.
Performance on futures contracts is guaranteed by a clearinghouse.
All futures require that traders post margin to trade. Margin is a good faith deposit.
Futures markets are regulated by an identifiable government agency, while forward contracts in general trade in an unregulated market.