A futures contract is a standardized financial agreement to buy or sell a specific quantity of an underlying asset (such as commodities, financial instruments, or stock indices) at a predetermined price on a specified future date. Futures contracts are traded on organized exchanges, and they play a crucial role in risk management, price discovery, and speculative trading. Here are key features and concepts associated with futures contracts:

1. **Standardization:** Futures contracts are standardized in terms of contract size, expiration date, and other specifications. This standardization allows for easy trading and ensures that all parties involved understand the terms of the contract.

2. **Underlying Asset:** The futures contract is based on an underlying asset, which can include commodities (e.g., gold, oil, wheat), financial instruments (e.g., bonds, interest rates), or stock market indices (e.g., S&P 500).

3. **Contract Size:** Each futures contract has a specified quantity or contract size of the underlying asset. For example, one gold futures contract might represent 100 troy ounces of gold.

4. **Expiration Date:** Futures contracts have a fixed expiration date, indicating when the contract will be settled. At expiration, traders must either close out their positions or fulfill the contract’s terms by taking delivery of the underlying asset (for physical delivery contracts).

5. **Contract Price (Futures Price):** The futures price is the price at which the underlying asset will be bought or sold when the contract is executed. It is agreed upon at the initiation of the contract and is not necessarily the current market price.

6. **Long and Short Positions:** A trader taking a long position agrees to buy the underlying asset at the specified price on the future date. In contrast, a trader taking a short position agrees to sell the underlying asset at the specified price on the future date.

7. **Marking to Market:** Futures contracts are marked to market daily, meaning that the gains or losses on the contract are calculated each day based on the current market price. These gains or losses are settled daily.

8. **Margin:** To trade futures contracts, traders are required to deposit an initial margin, which is a fraction of the contract value. Margin serves as a performance bond to ensure that traders can meet potential losses.

9. **Clearinghouse:** A clearinghouse acts as an intermediary between the buyer and the seller, guaranteeing the fulfillment of the futures contract. It reduces counterparty risk by becoming the counterparty to both sides of the trade.

10. **Settlement:** Futures contracts can be settled in two ways: physical delivery or cash settlement. In physical delivery, the actual underlying asset is delivered to the buyer. In cash settlement, the contract is settled in cash based on the contract’s value at expiration.

Futures contracts are used for various purposes, including hedging against price fluctuations, speculating on price movements, and gaining exposure to specific asset classes. They are an essential component of financial markets and contribute to overall market liquidity and efficiency.