Futures contract

Futures specify contract size, underlying and expiry terms. A position is commonly closed by taking an offsetting position rather than by delivering the underlying asset. Daily marking to market creates cash gains, losses and possible margin calls during the hedge, so liquidity matters even if the final hedge is effective. Standardisation improves tradability but may leave amount, timing or underlying mismatches. Clearing arrangements reduce some counterparty exposures but do not remove market, basis or funding risk. The futures price is not necessarily today's spot price.