What is future contracts ?

If futures contract is an agreement between two parties to buy or sell a asset at a certain time in future for a certain price. Unlike forward contracts, future contracts are normally traded on an exchange. to make trading possible the exchange specify set and standardized features of the contract. As the two parties to the contract do not necessarily know each other, the exchange also provides a mechanism that gives the two parties a guarantee that the contract will be honoured.

Basically forward contracts Arden over the counter derivatives however futures contracts are done through exchanges. The largest exchange on which futures contracts traded are the Chicago board of trade and the Chicago mercantile exchange. The traded commodities include pork bellies, live cattle, sugar, wool, lumber,  copper,  aluminium, gold and tin.