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The spot market sells things for immediate, or "on the spot," delivery.
The futures market lets you arrange to set the price of something now that you'll pay for and get later.
Commodities users like the futures market because it lets them predict costs. If you make twinkles it's easier to calculate the price of them a year out if you know what sugar will cost a year out. The risk is sugar will be cheaper a year from now than your futures contract has it priced at; that's mitigated by the risk sugar will be really high a year from now and a box of twinkles that sells for $2.99 will have $2.98 worth of sugar in it if you didn't have a futures contract outstanding.
Wiki User
∙ 10y ago
Wiki User
∙ 10y agoFutures contracts are agreements to purchase at a specific date in the future, a specific amount of a specific good for a specific amount of money.
A single-stock futures contract is just one with a specific company's stock underlying it.
My feeling on these is simple: don't buy futures contracts on securities! If the thing goes the wrong way you're still on the hook for it. All derivatives written against securities should be options contracts; if those stay out of the money you just let them expire worthless and lose nothing more than your premium.
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What is a contango position?
A commodity market is in contango if the spot price is lower than the futures price. A contango position is the futures position you hold with a price higher than spot price.
Difference between forward market and spot market?
Spot market is also known as "cash market" where the commodities are sell on the current price or the spot rate and deliver immediately, where as in case of forward market, market dealing with commodities for future delivery at prices agreed upon today (date of making the contract).
What has the author Joseph M Monahan written?
Joseph M. Monahan has written: 'The Foreign Exchange Market: Spot, Forward, Futures, and Options'
What does the phrase cash for settlement refer to?
The phrase "cash for settlement" refers to sellers who do not wish to take actual possession of a commodity. It is a more convenient method of transacting futures and options contacts. E.g. if you purchased cotton futures that are cash settled, instead of taking possession of the actual cotton, it pays the difference between the spot price of the cotton and the futures price.
Futures and spot prices are parallel?
A futures contract is a exchange traded device where someone can speculate on or hedge price risk regarding a specific commodity, bond market or stock index asset. The contract is a binding agreement of delivery of an asset at a predetermined time in the future. At first futures prices vs. the current price of the underlying asset they represent are not the same due to the time value of future money, market forecast opinion, news, etc. But as the futures contract comes to it's time conclusion it's price starts to closely track the spot or actual cash market price of the asset. In the end they are both at parity as the futures contract ends at the delivery date and thus is then equal to the then current cash market price of the underlying asset.
What are some characteristics of the foreign exchange spot markets?
The spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts with a futures market, in which delivery is due at a later date. In spot market, settlement happens in t+2 working days, i.e., delivery of cash and commodity must be done after two working days of the trade date. A spot market can be:an organized market;an exchange; orover-the-counter (OTC)Spot markets can operate wherever the infrastructure exists to conduct the transaction
A commodity futures market exists within the boarder commodities market for which reasons?
Finding prices: Buyers and sellers can trade standardized contracts for commodities at a later date on the futures market. This works with cost disclosure as market members altogether decide the fair worth of the item founded on market interest elements. Management of risk: Commodity producers and consumers can hedge against price volatility through futures contracts. Market participants are able to manage their risk exposure and protect themselves from adverse price movements by locking in a future price through futures contracts. Investment and speculation: Speculators and investors who seek to profit from commodity price fluctuations without actually owning or delivering the underlying asset are drawn to the futures market. Market liquidity is improved, and opportunities for capital appreciation are created as a result. Possibilities of arbitrage: Arbitrage opportunities are made possible by the futures market. By buying low in one market and selling high in the other, traders can take advantage of price differences between the spot market, which is the current market price, and the futures market. a more efficient market: By allowing market participants to make informed decisions based on available price and market information, the futures market makes efficient resource allocation easier. It makes it possible for efficient price formation and overall market stability by providing a platform for trading commodities that is both transparent and regulated.
What value is aluminum on the stock market?
Aluminum is not traded on the stock market. Aluminum futures contracts are traded on the commodities market--specifically, the London Metals Exchange (LME) and the COMEX, which is a division of the New York Mercantile Exchange.As of 29 Jul 2011, the spot price for aluminum was $2,582 per metric ton, with three-month futures slightly higher.
The difference between 0 spot and 1 spot?
Orientation. ~Dodge
Did ikonfx create the Spot Gold Futures contract in response to DFA legislation?
Yes,in cooperation with NASDAQ OMX Futures Exchange,IKONFX created the Spot Gold Futures contract in response to Dodd Frank Act (DFA) legislation, which forced the cessation of all leveraged retail spot gold transactions.
What is the difference between swap market and spot forward?
The swap market is one of the largest and most liquid global marketplaces, with many willing participants eager to take either side of a contract. According to the Bank for International Settlements, the notional amount outstanding in over-the-counter interest rate swaps was more than $341 trillion in 2019. In general, a spot rate refers to the current price or bond yield, while a forward rate refers to the price or yield for the same product or instrument at some point in the future. In commodities futures markets, a spot rate is the price for a commodity being traded immediately, or "on the spot". moneyplantresearch
What is the ticker symbol for natural gas?
UNG is for the American spot market. NG is for the futures market on the NYMEX. NG is followed by the letter corresponding to the appropriate month you want to trade...ie NGH is a natural gas contract for March. After that comes the year, so for a natural gas futures contract with expiration in March 2011, it'd be NGH11.
