A commodity future is an agreement between two parties to buy / sell the commodity on a future date at today's future price. The future date is expiry date of the contract and at that date the buy / sell is squared off by the parties. Here commodity exchange acts as an intermediate entity and if any dispute arises, it is settled by the exchange fairly and the decision is binding to both the parties.
Both parties can't decide separate terms of future contracts but have to accept the terms set by the Exchange.
In India, MCX and NCDEX are the major commodity exchanges. Main commodities traded on MCX are Gold, Silver, Copper, Crude etc, and NCDEX is mainly for agri commodities.
The difference of buying price (bid) of a commodity and selling price (ask or offer) of the same commodity and same contract at the same time is known as bid-offer spread. One can get an idea of volatility of the commodity by the bid-offer spread.
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