Read this web encyclopedia entry about futures and match the paragraph numbers with the headings.

Futures

1   
A futures contract is a contract to buy or sell an asset at an agreed future point in time, and is traded on a futures exchange.  A futures contract can be standardised in the following ways:

			The amount of the asset to be traded
			The unit of currency to be used
			The quality of the deliverable.  In the case of physical commodities, this can include the manner and location of delivery
			The delivery date

A futures contract varies in price according to these variables, and so is an example of a parametric contract.

2   
The price of a futures contract constantly fluctuates, putting both the owner and exchange at risk.  To minimise this risk, the exchange requires the contract owner to post a form of collateral, which is known as margin.  Both buyer and seller pay initial margin.  This is the possible amount of loss that could be made on a day’s trading according to historical price changes, and is usually between 5 and 15% of contract value.  A further margin, known as variation margin, may also need to be paid.

3   
Originally futures were traded on commodities, especially agricultural commodities such as grains and meats.  Other commodities futures included oil and other fuels, and metals.  In the 1970 the first futures contracts on financial instruments, such as currencies, bonds and stocks, were traded.  These were immediately successful and are now more important in terms of trading volume than commodities.

4   
Futures exchanges standardise the terms of futures contracts, oversee trading and coordinate payments.  One of the largest exchanges is the Chicago Mercantile Exchange, which was the main agricultural futures exchange, trading in meat, milk and butter.  It has since diversified into financial futures.  There are some specialist futures exchanges, such as the London Metal Exchange, the London International Financial Futures Exchange and the International Petroleum Exchange.

5   
There are traditionally two types of traders: hedgers and speculators.  Hedgers are usually producers or consumers of a commodity who are seeking to hedge out the risk of price changes.  For example farmers sell futures for the crops they produce so they are guaranteed a certain price, allowing them to plan ahead.  Livestock producers may buy animal feed futures, so that they have a fixed cost for feed, again allowing them to plan their finances.  Speculators try to make a profit by predicting market changes and buying commodities ‘on paper’, which they have no practical use for.  Hence risk is transferred from hedgers to speculators.

Match the sentence beginnings and endings to complete these definitions of expressions related to futures.

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