A futures contract is a standardized contract to buy or sell a certain commodity called the underlying. This can be an equity or loan instrument or any commodity such as pork, gold etc. Yes the contract is standardized and the date that the purchase or sale is made is an element in this standardized contract. One can say that in some way the terms of the contract are already written down and agreed. You are buying into this 'agreed' contract but paradoxically you are may be buying into a contract to sell something. Yes this is what a futures contract is.
Futures contracts are standardized to the extent that the contracts can be traded. And more than! These contracts must be able to be traded for they are traded in a marketplace called a futures exchange. Thus they are not at all customized deals; It is interesting indeed to ask if you can make something customized out of something standardized; Yes this is a question that can be asked about futures. However when you customize these contracts, you lose the essential element of the futures contract which is the marking-to-market. This concept is explained below.
Thus this standardized contract, which is the futures contract, is about buying or selling a certain commodity or instrument whether specifically financial or otherwise; And the underlying instrument can be anything! It could be another contract e.g. an options contract; It could be an equity instrument or a sophisticated derivative contract. The futures contract too has a value or price and it is traded on the futures exchange. You want to buy or sell something, and then you buy the contract to do this; The futures contract is like a contract to engage in a contract. You are buying the right to engage in that contract and this contract has to be fulfilled.
The buyer of the futures contract must buy or sell the underlying at a certain date in the future; This date is important and it is at the heart of what a future is; Indeed 'the element of time' creates an important variable which is at the heart of financial instruments such as the futures contract.
In the futures contract, you could say that here are two prices. There is the price of the contract itself which you have bought. For the futures contract has a value. Then there is another price which is the price of the commodity which is to be bought or sold. Thus the price of the futures contract itself is a commodity that is traded daily and the price or value changes daily. This is called 'marking- to -market'. And note the differential between the value of the futures contract and the settlement price at that future time. It is this differential that is produced between the two prices or values that must be paid to the other side of the party or else credited to your own account in the market. For remember that futures are traded on a market called the futures exchange.
