This article about futures contracts can be found in the May 2010 edition of “Journal of Futures Markets” (Vol. 40, No. 2, pp. 7-25).
The main difference between forward and futures contracts is that the former are written in present tense and the latter in future tense. A forward contract is a contract that specifies what happens once a certain amount of time has passed. A futures contract is a contract that specifies what happens if a certain amount of time has passed.
This is just another example of the difference between forward and futures contracts. Forward contracts are written in present tense, whereas futures contracts are written in future tense. Futures contracts are written in present tense, whereas forward contracts are written in future tense.
If you think about it, forward contracts are designed to be fixed. They are meant to specify the exact amount of time you have to wait for a certain event to happen. It’s like saying, “I have to wait for a certain amount of time for the world to stop spinning.” With futures contracts it’s more realistic that you can say, “I have to wait for a certain amount of time for my car to start.
A future contract is a contract that specifies how long something will take to occur. A forward contract is a contract that specifies the exact amount of time you have to wait for a certain event to happen.
While futures contracts and forward contracts are both simple contracts that specify the exact amount of time you have to wait for something to happen, futures contracts also specify the exact amount of money you have to wait for a certain event to happen.
Futures contracts provide a little more of a tangible sense of how much time you are willing to delay. For example, if you have a contract to buy a $60,000 car in one month, and you only have $100,000 left before you need to make the purchase, you could imagine a future contract that is more like this: My car will start in about one month, and I have $100,000 left to buy a $60,000 car.
Forward contracts are contracts that specify how much time you have to pay for something. The example we used is the exact same as a futures contract, except that it is a reverse contract.
As a reverse contract, if we have a contract to buy $100,000 worth of stock in about four months, and we don’t have 100,000 left, then we could imagine a future contract that is two months in length. This contract would specify a penalty for waiting too long to buy the stock as 1% or $15,000.
Basically, in order to buy a car, you would pay an upfront price and then get the car for a certain amount of time. The seller would then give you the car for the agreed amount of time, and you would receive the car when the agreed amount of time is up.
