What characterizes a forward type contract?

A forward type contract is characterized by the right to buy or sell a specified amount of an asset at a specified price, on a specified future date. Unlike exchange-traded contracts, forwards are typically customized agreements between parties, allowing for specific terms tailored to their needs. This feature enables the parties involved to hedge against price fluctuations in the underlying asset, providing certainty regarding the transaction.

In this context, the correct answer emphasizes the essential aspects of forward contracts: the predetermined amount and price, as well as the future execution date, all of which are fundamental to understanding how these financial instruments operate. This contrasts with other choices that don't capture the specific nature of forward contracts, such as trading activity, expiration timeframe, or guarantees of profit, which are not intrinsic characteristics of forward contracts.