I keep hearing about gold futures, pork futures ect. Always wondered what they were.|||In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price.
A futures contract gives the holder the obligation to buy or sell, which differs from an options contract, which gives the holder the right, but not the obligation. In other words, the owner of an options contract may exercise the contract. Both parties of a "futures contract" must fulfill the contract on the settlement date. The seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position has to offset their position by either selling a long position or buying back a short position, effectively closing out the futures position and its contract obligations.
Futures contracts, or simply futures, are exchange traded derivatives. The exchange's clearinghouse acts as counterparty on all contracts, sets margin requirements, etc.|||futures are a form of hedging. ie I want to guarantee that the price of something I need in the future does not exceed a certain amount. A Future contract is one way to get "insurance" on pricing. The price today is $2, but I'm worried that market trends might push the price up quite a bit in a certain period of time. I bet that the price will go up more than say $3, so I buy a Future for $3. If the prices go up more than $3, I've just "won." If the price does not go beyond $3, I've lost the bet.
Futures contracts are similar to options contracts, the main difference is that with a futures contract the buyer or seller of the underlying commondity must make the purchase/sale. With an options contract, the buyer/seller of the underlying commodity just has the option to buy/sell with no obligation.|||you have clubbed many in one question.
Futures is a common terms in derivative Instruments.
They are being adopted in equity/stock, commodities, pork Finance, etc.,
Future trading has common applications in all exchanges of instruments - sale, buy, etc., - when transaction completes instantly it is cash - when you do the transaction expecting future trend then it is futures - if you wanted to do safely, you should have support of options - Hedging.
As far as Futures when it comes to Finance it relate to currencies.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment