Which of the following is NOT a characteristic of a futures contract?

A futures contract has several defining characteristics, and understanding them helps clarify why the notion of guaranteeing profits does not fit within this framework.

A futures contract indeed involves a delivery at a future date, allowing parties to lock in prices for commodities or financial instruments that will be exchanged at a later time. This feature provides certainty in transactions, which is essential for businesses engaged in planning.

Trading on commodity exchanges is also a fundamental aspect of futures contracts. Such exchanges facilitate the buying and selling of contracts, creating a standardized process for market participants to engage in these transactions.

A key feature of a futures contract is that it specifies the price at which the transaction will occur in the future. This detail is crucial as it determines the cost for the buyer and seller when the contract is executed.

However, the idea that a futures contract guarantees profits regardless of market conditions is a misconception. The nature of futures contracts involves risk, as market prices can fluctuate significantly. Depending on market conditions at the time of contract settlement, a trader can realize gains or losses. Therefore, there is no inherent guarantee of profits, making this the correct answer in identifying what does not characterize a futures contract.

Understanding these distinctions is vital for anyone studying or participating in futures trading, as it highlights the importance