A contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.
Contract specification
Each commodity is different. There are even different delivery months of the same commodity. Understanding the futures contract specifications is at the heart of knowing the rules that govern trading a commodity futures contract, as well as the price movement value of each commodity. The Futures contract specifications which are printed in Commodity specifications.
Trading on futures contract based on specification of quality, quantity, price, trading procedures, delivery procedures and settlement mechanism. This comes all together as contract specification.
