Every futures contract has four characteristics:
• The asset, (eg corn or currency)
• The quantity of the asset (eg 5,000 bushels, $100,000)
• Delivery
• Delivery date
Asset
When a party enters into a futures contract, they are agreeing to exchange an asset (a physical commodity like crude oil, or a financial product like a foreign currency) or underlying at a defined time in the future. When the asset is a physical commodity, to ensure quality, the exchange stipulates the acceptable grades of the commodity.
Quantity
Each futures contract specifies the ‘contract size’ (the quantity of the product delivered for a single contract), for example 5,000 bushels of corn. The exchange defines the contract sizes to meet the needs of the market participants.
Delivery
A futures contract also specifies where the asset will be delivered. Consideration of delivery is important for those assets resulting in significant transportation costs, and a specific state and mode of transportation may be stipulated.
Delivery date
Depending on the contract market, delivery can be anywhere from one month, to years in the future. Every futures contract is referred to by its delivery month, for example, ‘the December corn contract’, since this point in the future is relevant to the value and execution of the contract position. The exchange specifies when delivery will occur within the month, and when a given contract initiates and terminates trading. Usually trading for a contract is terminated a few days before the specified delivery date.
Crazy about Futures Trading? We are! At https://ntrading.io we share and discover some of the latest and most proven futures trading products on the market: the best trade rooms, the hottest apps, the most proven indicators; plus receive updates on product discounts and read through genuine product reviews.
If you’d like assistance with getting started, please peruse our list of trading businesses to see what business is right for you.
For futures traders, by futures traders.
Find and hang out with us on:
Facebook @NatTrading
Twitter: @natural_trading
Reddit: Nat_Trading
Quora: Natra Jodd
Or drop us an email at hub@ntrading.io