A contract specification is the set of product terms that defines what a tradable contract or instrument represents, including unit size, quote convention, tick size, expiry or settlement rules, margin treatment, and other operational details.
How it works
Exchange-traded derivatives publish standardized specifications so traders know the contract size, price increment, trading hours, settlement method, and expiry cycle.
Other products such as CFDs, ETFs, and spot-style instruments use different documents and conventions, which is why two products linked to 'gold' can create very different exposures and costs.
Why it matters
The product label alone is not enough to calculate P&L, margin, financing, or expiry risk. Those depend on the exact specification.
Comparing instruments by underlying theme while ignoring contract details can produce accidental leverage, unexpected roll exposure, or mistaken assumptions about ownership.
A simple market example
Gold futures, a gold ETF, physical bullion, XAU/USD, and a gold CFD may all reference gold, but they differ in unit, expiry, custody, leverage, settlement, and holding friction.
Common mistakes
Assuming two products with the same underlying price behave identically for the holder.
Calculating position size before checking contract multiplier, tick value, or minimum trading unit.
Frequently asked questions
Where do I find contract specifications?
For exchange products, use the exchange or broker's official specification; for funds or OTC products, use the issuer/provider documents.
Do spot products have specifications?
They still have quote, settlement, minimum size, financing, and execution conventions even when there is no standardized futures expiry.
Why do specifications matter for risk?
They determine how a price move translates into P&L and how much capital or margin the position requires.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.