CFM50370 | Derivative contracts: relevant contracts: futures: examples

Examples explaining the definition of ‘future’

Example 1

A company buys a number of exchange-traded wheat futures contracts. The contract specification provides that the holder of the contract can opt to take physical delivery of the wheat. The company has no intention of taking physical delivery and in fact closes out its position before the maturity date of the contracts. The contracts are nevertheless futures for the purposes of Part 7 CTA09, since they provide for the possibility of the specified property being delivered.

Example 2

A company buys a number of exchange-traded weather futures. These are settled by a cash sum which the company must either pay or receive depending on the difference between the average temperature for a given month and a reference level. Ambient temperature is not property which is capable of being delivered, so for the purposes of Part 7 these instruments are only relevant contracts if they as CFDs (contracts for differences), see CFM50380.