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How are various commodities prices quoted in a futures contract?
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How do you cope up with the increasing prices of commodities in the market?
One option would be to purchase a contract of the commodity in the futures market as a hedge. So although you would be paying higher prices for the commodity, you would be offsetting that cost as the futures price rose on the contract. Another option would be to sell the commodity in the futures market as a hedge. But instead of only selling one contract, you could sell several contracts as the price increases higher and higher in a grid formation. Then buy back all the contracts at once when a net profit has been reached.
How does buying oil futures work?
"Futures" are just contracts for a delivery of a certain commodity (oil, in this case) for a "future" delivery. If oil prices never changed, then a oil futures contract would be the base price of oil plus some storage cost and administrative fees. But this would make for some pretty dull trading and, in fact, oil prices do change -- and sometimes they change a LOT. Like all commodiities, the price is a function of the supply of the commodity v. the demand for that commodity. If supplies are short (e.g. OPEC announces it will cut production by 20%), prices will typically go up. If demand goes down (e.g. Big Oil, Inc. announces it can synthesize oil from old AOL disks, thus making oil as accessible as water), prices for the commodity go down. A trader may buy an oil futures contract (an agreement on a certain amount of oil at a certain point in the future) in the expectation that the price of oil will rise. If it does, the contract may be worth more. Since the trader doesn't pay the full amount of the contract, but only a small percentage, the trader has a great deal of leverage and their profits (and losses) are much greater than had they simply bought oil itself. (You can also SELL the commodity first, planning to buy back the contract later when/if the price goes down -- a process known as "shorting".) All commodities trading is a "zero-sum game". For every dollar won, someone loses a dollar. Futures trading is a truly excellent way to lose money in a stunningly fast manner. "Futures" are just contracts for a delivery of a certain commodity (oil, in this case) for a "future" delivery. If oil prices never changed, then a oil futures contract would be the base price of oil plus some storage cost and administrative fees. But this would make for some pretty dull trading and, in fact, oil prices do change -- and sometimes they change a LOT. Like all commodiities, the price is a function of the supply of the commodity v. the demand for that commodity. If supplies are short (e.g. OPEC announces it will cut production by 20%), prices will typically go up. If demand goes down (e.g. Big Oil, Inc. announces it can synthesize oil from old AOL disks, thus making oil as accessible as water), prices for the commodity go down. A trader may buy an oil futures contract (an agreement on a certain amount of oil at a certain point in the future) in the expectation that the price of oil will rise. If it does, the contract may be worth more. Since the trader doesn't pay the full amount of the contract, but only a small percentage, the trader has a great deal of leverage and their profits (and losses) are much greater than had they simply bought oil itself. (You can also SELL the commodity first, planning to buy back the contract later when/if the price goes down -- a process known as "shorting".) All commodities trading is a "zero-sum game". For every dollar won, someone loses a dollar. Futures trading is a truly excellent way to lose money in a stunningly fast manner.
What is trading possibility frontier?
as in production possibility curve compares production rates of two commodities, this compares prices of different commodities.
What are the functions of prices in a market economy?
Prices are a mechanism by which commodities are efficiently allocated in ideal conditions; prices send a signal about the value of a commodity.
Is it really secret societies fault that gas prices are so high?
No secret WALL STREET FUTURES drive prices up
What could one find on the website Futures and Commodities?
Futures and Commodities is a website dedicated to following the prices of commodities like natural gas, oil, and gold among others. The site also takes a look at the past and potential future of these commodities.
How do you cope up with the increasing prices of commodities in the market?
One option would be to purchase a contract of the commodity in the futures market as a hedge. So although you would be paying higher prices for the commodity, you would be offsetting that cost as the futures price rose on the contract. Another option would be to sell the commodity in the futures market as a hedge. But instead of only selling one contract, you could sell several contracts as the price increases higher and higher in a grid formation. Then buy back all the contracts at once when a net profit has been reached.
Conditions under which forward and futures prices would be equal?
Different price of futures and forward which are identical (similar underlying assets) is because of the daily settlement on the futures contract. the price for both contract will be the same before the daily settlement.
What are the basics that need to be understood for futures trading?
One of the basic that needs to be understood for futures trading is that it can be a very risky business. It is the buying and selling of commodities in the future. The prices are usually fixed at the time you enter into an agreement.
What is the best place to check crude oil futures?
The best place to check crude oil futures is CNN commodities section. This section allows viewers to get the latest prices for oil, gold, silver, copper, and more.
How Commodities Trading Works?
Commodities are physical goods such as food stuffs like corn and wheat, precious metals like gold and silver, and raw materials like steel and oil. Commodities are traded on exchanges, like stocks. The difference is that since commodities are physical items, it is difficult to literally trade barrels of oil, bars of gold or bushels of wheat within the actual building. So, commodities traders use futures contracts. A futures contract is an agreement between buyers and sellers of commodities. For example, say a copper mining company knows it will have mined a certain amount of copper at a future date. The company wants to sell that copper. Another company that creates products made from copper wants to buy a certain amount that it will need at a future date. If these two companies simply wait until that future date, the price of copper has a lot of time to rise or fall. To hedge against the risk of the price of copper rising or falling, the two companies create a futures contract stating that they will make the transaction at the agreed upon price. The contract prevents the price from moving for only the specified amount of copper. Producers and consumers of commodities use futures contracts to protect themselves from losses due to commodity price fluctuations. There are two types of participants in the commodities markets: commercials and speculators. Commercials are the actual companies or businessmen who mine, grow, harvest or extract commodities. Commercials use futures contracts to structure their businesses and grow their profits. Speculators are individuals who are not involved in the commodities business per se, but trade futures contracts in the hope of making money. Like stocks, the aim of commodity speculation is to buy futures contracts at low prices and sell them at high prices. Commodity speculators bet on whether or not the price of certain commodities like gold or oil will rise. Like stock speculation, commodity speculation involves considerable risks. Unlike stocks, futures contracts represent large amounts of individual commodities. This means that, depending on the price movement of the commodity, the speculator stands to lose a much larger amount of money.
The History of Future Contracts and Future Prices?
The future prices represent the agreed upon monetary value for certain assets. The buyer and seller come to a compromise on when the asset will be sold; they also agree to a future date for this transaction. The futures contract is a written document between these two parties for the transaction. There is an exchange that exists solely for the trading of futures contracts. The futures contract is totally different from direct securities. For example, stocks, bonds, and warrants are all examples of direct securities. The purchaser of the futures contract is willing to take a long position for the future prices. The seller in the transaction takes a short position in this transaction. The main influence on future prices is supply and demand. This factor has the greatest influence on the entire process. In addition, the underlying asset does not have to be a commodity. Commodities are things like currencies, financial instruments, and securities. Another factor in the transaction is the delivery date of the contract. This date can also be referred to as the future date. This is the date that the contract must be delivered. The history of future prices can be traced all the way back to Japan in the 1730's. In 1864 the Chicago Board of Trade listed the first forward exchange contract. This contract was based on grain, and this contract also started a trend. A number of futures exchanges were set up around the world. By the year 1875, cotton was being traded in Mumbai. In the next few years the trade expanded to raw jute, jute goods, and edible oilseeds complex. The futures prices are stabilized by the futures contract being liquid. This is possible because the contract is highly standardized. The futures contract specifies the underlying asset or instrument. This can be a barrel of crude oil, or this can be a short term interest rate. The type of settlement is also specified. The settlement can be cash or physical. Another example is the contract in which the futures contract is quoted. Also, the quality and grade of the deliverable is factored into the equation. When it comes to bonds, the contract specifies which bonds can be delivered. Another factor affecting future prices is the credit risk. For instance, the trader must post a performance bond to reduce the risk. The amount of the performance bond is typically 5%-15% of the contract value.
Who profits from futures trading?
The main people that profit from futures trading are the hedgers and speculators. The hedgers are the producer of the commodity who trades a futures contract to protect himself from changes in prices in the future for his product. A speculator is the independent floor traders and private investors that buy the contract and sell it for higher price.
What is the difference between a forward contracts futures contracts and options?
Forwards and futures are essentially the same thing: a commitment to buy/sell at a certain date for a certain price. The difference is in futures contracts you're also committed to sell a certain quantity, whereas in a forward you're not.An options contract gives you the option, but not the obligation, to buy or sell. This is great if you're working with stocks. If you have a futures contract to buy 500 shares of Coca-Cola for $10 per share on January 15 and Coke closed at $8 on January 15, you just lost a thousand dollars. If you were long on a put with the same spread between strike and stock prices, you made $1000.Forwards and futures have a purpose in life--IF you're dealing commodities with the intention to use them. You make frozen pies. You know you need ten tons each of wheat, sugar and apples. If you have a futures contract for October delivery on all of those commodities, you know what your pies' materials value is going to be, hence you can publish a good price for your pies. But futures speculators--investors who buy futures with the intent of selling the product after delivery, or the contract to a producer (there is a secondary market in futures)--have a long and proud history of losing their asses on these, so I recommend against them as an investment vehicle.
What is the natural gas futures prices target?
the natural gas futures prices target is about 665,000
Where can futures prices be found?
Upon researching "Futures" there are no definitive results that would require a price to be given. Futures involves contracts related to the buying and selling of assets and there would not be a set price for this. If this is an inquiry regarding "Future Shop" then there is a full listing of prices on their website for the various products sold.
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.
