A futures contract is a form of forward contract that has been standardised for a wide range of uses. It is traded on a futures exchange. Futures may also differ from forwards in terms of margin and delivery requirements.

The standardization usually involves specifying:

· The amount and units of the underlying asset to be traded. This can be a fixed number of: barrels of oil; lengths of random lumber; units of weight (bushels of wheat, ounces of bullion); units of foreign currency; interest rate points; Equity index points; National bonds

· the unit of currency in which the asset is quoted. Because U.S. futures exchanges have dominated the market, this is very often the US dollar (USD), even when the corresponding OTC market quotes differently (for example the Interbank market quotes in Yen per USD, whereas currency futures are quoted in USD per Yen).

· The grade of the deliverable. In the case of physical commodities, this specifies not only the quality of the underlying goods but also the manner and location of delivery. For example, the NYMEX Light Sweet Crude Oil contract specifies the acceptable sulfur content and API specific gravity, as well as the location where delivery must be made.

· The delivery month.

· The last trading date.

· Other details such as tick size, the minimum permissible price fluctuation.

Because they vary in price as a direct function of these variables only, a futures contract is an example of a parametric contract, and is easily combined or traded as part of more complex financial derivatives deals.

From wikipedia - Used with permission