One of the key characteristics relating to exchange traded products is the ‘contract specification’; this states clearly the obligations of the buyer and the seller in terms of the quantity, the description of the commodity to which the futures contract is linked, the delivery date and the location, and how settlement (payment) will be effected. This sounds terribly complicated but in fact ensures that everyone knows what they are contracting for; there can be no debate about the quality of the gold or the sulphur content of the crude oil as everything relating to this is pre-specified.
‘“trading commodities” and “trading futures” are the same thing.’
(Jim Rogers, Hot Commodities, Wiley, 2007)
Futures can be used as pure ...