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Futures are exchange-traded, standardized contracts
Forwards are privatey negotiated, over-the-counter transactions, and therofre not marked to market.
Financial Derivatives / Futures & Forwards
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Futures contracts are legally binding commitments to deliver or to take delivery of a specified quantity and quality of a commodity at a specified future time for a specified price.
Future contracts do not entail an immediate transfer of ownership of underlying security, rather, it is set at today's market prices, and commodity will be delivered sometime in the future.
In actual practice, most contracts are closed out in the marketplace before their delivery, so physical deliveries are rate.
Commodities included for futures trading are wheat, canola, corn, coffee, cocoa, hogs, cattle, metals (gold, copper, and silver), lumber and energy products etc.
Forwards
Forwards are the OTC equivalent of future contracts. A forward allows the holder to make or take delivery of the underlying commodity or financial instrument at some time in the future at a price that has been negotiated based on today's market price.
Forward contracts are negotiated between individuals, rather than on an exchange floor. Its details can be tailored to individual needs.
Most forward contracts are issued by banks to hedgers such as pension funds, manufacturers, and corporations. Contracts are usually very large and are either held to maturity or reversed upon the request of one of the parties. The largest players in this market are the banks, who trade both foreign exchange and interest rate products.