FUTURE CONTRACT

Future contracts are exchange traded contracts with an agreement to buy or sell a specified quantity and quality of an asset for the price agreed upon by buyer and seller at a designated future date.

future contracts have certain standardised specifications –

• the quantity of the underlying
• the quality of the underlying
• date and month of delivery
• location for settlement
• units of price quotation

Features of future contracts –

• they are traded in only organised stock exchange.
• it requires stated standardised contract terms specified by the exchange.
• it requires marginal payments and daily settlement.
• future contracts can be closed very easily.
• these are executed on expiry date or maturity date.
• future contracts are expressed in currency unit and minimum price movement is called tick size.