What type of contract is made on a commodity exchange for future transactions?

A commodity future is a standardized contract traded on a commodity exchange that obligates the buyer to purchase, and the seller to sell, a specified quantity of a commodity at a predetermined price on a specified future date. This type of contract allows both producers and consumers to hedge against price fluctuations in the market while facilitating price discovery for the commodity involved.

What sets commodity futures apart is that they are standardized, meaning the terms of the contract (like quality and quantity of the commodity and the delivery date) are set by the exchange. This standardization allows for easier trading and reduces transaction costs, as opposed to other contracts that may be more customized or based on negotiations between the parties involved.

In contrast, options contracts provide a right without the obligation to buy or sell, swaps involve exchanging cash flows between parties based on different financial instruments, and forward contracts are tailored agreements that are not standardized and usually traded over the counter instead of on an exchange. Therefore, the identifying characteristics of a commodity future make it the correct answer for this question regarding contracts used in commodity exchanges for future transactions.