For example, oil futures are quoted at 89.5, which is also around the actual price of oil right now. Is the price quoted for the futures contract just the price of the commodity right now, or is it for a future date, and if so what is the time period used for a standard future?|||The spot price may be significantly different than the futures price, and depends on many things, including the grade of oil and the point of delivery.
The futures contract is standardized for one particular grade and point of delivery. The front-month oil contract is currently for January delivery. Oil has a futures contract for each month, for the next 12 months.
The standard time period for each futures contract is 30 days.
In general, individuals are interested only in speculating on the price change of oil, and not interested in taking delivery, nor would we know what to do with 1,000 bbl of oil. As such, time is relatively unimportant.
Producers of oil and refineries use the oil futures to lock in a delivery price at some future date. If an oil producer thought oil prices were going down, he might sell short one Jan futures contract today at $92/bbl, for 1,000 bbl. In the third week of Jan, 2008, this producer could cover his short position and buy one contract back, or deliver his 1,000 bbl of oil for the agreed $92/bbl, regardless of the price of oil at that time.
Alternatively, if this same producer thought oil prices were going down in the longer-term, he could sell short the Sep, 08 contract and have almost one year to deliver or cover.
The futures price quoted in the current futures price, but it is also the delivery price at the end of the contract.|||They are for a future date. I'm not sure of the delivery date being used for crude right now, but I know gold is in February right now and is about $7 dollars over the spot price. As we get closer to February the future price gets closer and closer to the spot price.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment