Future Contract Characteristics

Future Contract Characteristics

Future contract Characteristics may be explained in terms of standard form, margin requirement, settlement and liquidity.

1. Standard Form

Future Contract is offered in standard form. It means that they are not specific to the need of user or these are not customized contract.

2. Margin Requirement

Future contract can only be set with minimum payment, which is technical known as margin requirement for setting future contract. This payment is made to cover the possible loss from the future contract.

3. Settlement

Future contract are settled rather than executed. it means that if you have bought future contract , you would sell it on or before settlement date, similarly if you have sold future contract, then you need to buy on or before settlement date.

4. Liquid

Future contract are regarded more liquid due to the trading facilities. Future contract can easily be traded in future markets.