The peculiarity of futures contracts is the highest level of their standardization. Contracts are standardized according to the quantity, specification, place and date of delivery. Since not all basic commodities can be standardized, there are futures contracts only for the main ones. The futures for agricultural products, metals, oil, exchange indices, currencies, shares, etc. are traded on markets around the world at the moment.

Futures markets are constant auctions giving the latest information about the balance between demand and supply for one or another commodity. Trading futures contracts is carried out on such major world exchanges as Chicago Board of Trade, Chicago Mercantile Exchange, and NYMEX.

Remember that on a futures exchange the terms 'selling' and 'buying' are rather conventional because you do not have to buy a contract before you sell it. It is more important whether you speculate for a rise or for a fall in its price. In the first case you sell and your partner buys the contract. In the second case, you buy and the market automatically finds you a match for the deal who sells you a contract. Thus, the market is like a set of multiple two-sided bets. Besides, you do not know your particular partner and it does not matter since there is a system of margin deposits to secure the functioning of the trading mechanism.

While entering a futures contract, the buyer and the seller deposit some margin in order to protect either side from losses if one of the sides refuses to fulfill the contract. The deposit size depends on how fast the price of one or another contract changes and is determined by brokers. This deposit, or margin, can be written off by the broker in order to cover his expenses in case the price of your commodity starts changing not in your favor.

Minimum futures margin requirements are determined by exchanges where the corresponding contracts are traded. Usually, the margin size is about 5% from the market price of a futures contract. Exchanges are constantly tracing tendencies on the market and they can make their margin requirements higher or lower if necessary. Broker firms can make higher requirements for their clients than those determined by an exchange.

• Initial Margin
  The sum an investor must transfer to his broker company's account for each bought or sold contract is called Initial margin (it is an initial deposit requirement, sometimes called original margin). Each day when you have a position opened, the gained profit is added to this amount or the loss is written off.

• Maintenance Margin
  If your losses result in making your margin account go down below a certain level called maintenance margin requirement (it is a minimum amount required for maintaining a margin account), a margin call occurs, i.e. your broker requires that you add money to your margin account to achieve the initial margin level. Also, such a demand may occur if the exchange or your broker increases the margin requirements.

Before you start trading futures, you should know for sure when a margin call may occur. You will have to add money to your margin account within a quite short time period (1-2 days). If you do not do it, your broker can close your position in order to protect himself against possible losses.

Two types of market participants deal with futures: hedgers and speculators. Hedgers use futures as a protection against price fluctuation. As a rule, they produce or use some basic commodity in their regular business. Unlike hedgers, speculators buy and sell futures only to earn profit from price fluctuation.

There is a great risk in speculating on the futures market, so only those investors who realize this entire risk and can afford it may take part in it. Speculating on this market, you can either earn a much larger profit from the initially invested amount as compared to other financial instruments or make correspondingly large losses.