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Commodity brokers use forward and futures contracts for which of the following reasons?
Kingstonz
The seasonal nature of many commodities would lead to wide variations in supply and price without these contracts.
The seasonal nature of many commodities would lead to wide variations in supply and price without these contracts.
The seasonal nature of many commodities would lead to wide variations in supply and price without these contracts.
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What best explains what a forward contract is?
A contract to deliver a particular commodity to a buyer sometime in the future.
Ask us of the following best explains what a forward contract is?
A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging
Labor rate in India?
Inflation in India was gone upto 13 % and now reduced to 6.38 BUT in reality commodity prices increased when oil prices increased but not reduced when oil prices slashed..so until unless basic commodity prices reduce, Labour rate in India will not come down. as usual it increases Min 10% avg this year also.. Govt has to come forward now and reduce the commodity prices to control the labour rate in India..
How to Trade Commodities?
Untitled 1What is a Commodity?Commodities are actually physical items that can be handled, stored, and moved about. These are goods for which there is a commercial demand. Commodities include such items as corn, gold, and crude oil. They can be purchased and sold for immediate delivery, known as "spot" delivery, or promised by contract for future delivery. It is these contracts for future delivery that form the basis of the commodities trading market.What is a Future?In fact, what is traded in commodities trading markets is what are called futures or futures contracts. These have essentially the same features and effect as the forward delivery contract referred to above, but they are the embodiment of the exchange involved in commodities trading. These are traded in the commodities market through futures exchanges.Futures contracts serve an important and valuable purpose for purchasers of goods for use in production. A large commercial baker needing a bulk quantity of wheat at a certain time in the future wants to be sure of its availability. To ensure that availability, the maker can enter into a contract for its future delivery with a supplier. Price, quantity, and delivery are guaranteed by the contract, and the purchaser will pay contract price to complete the purchase.
What is the difference between swaps and forward contracts?
By Irfan Ullah (MS MAJU Islamabad)Difference between swap and future market:NoFuture contractSwap1Traded at exchangeNot2No counterpartyHaving counter party3Clearing house existNo4No riskRisk of the counter party exist5Marked to marketRarely marked to market6Mostly long term contractMostly short term7RegulatedUnregulated
Commodity brokers use forward and futures contracts for what reasons?
The seasonal nature of many commodities would lead to wide variation in supply and price without these contracts.
What do commodity brokers use forward and futures contracts for?
Futures contracts and forward contracts are used to eliminate uncertainty in the commodities markets by locking in a price on a good to be delivered at a later date. Okay, a quick example follows: I make cookies and you grow wheat. Wheat is a liquid commodity in that the price changes all the time. I know that and so do you, so I go to you before you plant and offer you $7 per bushel for your whole harvest when it comes in, and you accept. This is a forward contract--a futures contract would have volume and time requirements you might not be able to meet. The risk to you is that wheat might be selling on the open market for $8 per bushel at harvest time and to me the risk is that it might be selling for $6. The other side of that is, if it's selling for $8 I'm going to be in trouble without this contract, and if it's selling for $6 then you are. But at $7 we are both getting a fair deal.
Why do commodity Brokers use forward and future?
If the contract buyers use the underlying product, they use forward and futures contracts to eliminate market risk. Say you are a manufacturer of breakfast cereal who will use 500,000 bushels of corn this year. If you buy corn only on the spot market, you have two worries: what the price will be when you need it, and whether there will be that much corn on the market this year. But by purchasing futures contracts you know what it will cost and when it will arrive. If you're a farmer you'll use a forward contract to set the sale price of your corn, usually before you turn the key on your tractor to plant the new crop.
Why do commodity brokers use forward and futures contracts?
If the contract buyers use the underlying product, they use forward and futures contracts to eliminate market risk. Say you are a manufacturer of breakfast cereal who will use 500,000 bushels of corn this year. If you buy corn only on the spot market, you have two worries: what the price will be when you need it, and whether there will be that much corn on the market this year. But by purchasing futures contracts you know what it will cost and when it will arrive. If you're a farmer you'll use a forward contract to set the sale price of your corn, usually before you turn the key on your tractor to plant the new crop.
What are the similarities and differences between forward and future contract?
Similarities:1. Both are derivative securities for future delivery/receipt. Agree on P and Q today for future settlement or delivery in 1 week to 10 years.2. Both are used to hedge currency risk, interest rate risk or commodity price risk.3. In principal they are very similar, used to accomplish the same goal of risk management.Differences:1. Forward contracts are private, customized contracts between a bank and its clients (MNCs, exporters, importers, etc.) depending on the client's needs. There is no secondary market for forward contracts since it is a private contractual agreement, like most bank loans (vs. bond).2. Forward contracts are settled at expiration, futures contracts are continually settled, daily settlement.3. Most (90%) of forward contracts are settled with delivery/receipt of the asset. Most futures contracts (99%) are settled with cash, NOT the commodity/asset.4. Futures markets have daily price limits.
What is a forward commitment?
A forward contract is legally binding promise to perform some actions in the future . Forward commitments include forward contracts , future contracts and swaps
Concept of hedging?
The concept of hedging is to reduce the risk of financial loss. Hedging originated out of the 19th century commodity markets. A hedge can include stocks, exchange-traded funds, insurance, forward contracts, swaps, and options.
When you choose future contract over forward contract?
When there isn't an active market for the forward contract. Generally, Futures contracts have a much more active open market than forward contracts and have alot more choice in terms of expiration months than forward contracts.
What is an example of a derivative product?
Derivative instruments are classified as: Forward Contracts Futures Contracts Options Swaps
What best explains what a forward contract is?
A contract to deliver a particular commodity to a buyer sometime in the future.
How does the triceps and biceps work together to straighten your arm?
When lowering arm biceps relax and triceps contracts. When one contracts the other relaxes when you move it forward and downward.
What is meant by MCX-SX?
Multi Commodity Exchange of India commonly known as MCX is a self-regulating commodity exchange that was established in 2003 in the city of Mumbai, India. This independent exchange has been operating within the regulatory framework of the forward contracts Act, 1952. MCX-SX is India's third national stock exchange after the Bombay Stock Exchange and the National Stock Exchange. If you want to know more about MCX then you visit to Quoteonmobile. It is provides live market data - commodity and equity - on mobile devices, desktops and laptops
