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What is the impact of time decay on futures contracts?
Time decay refers to the gradual reduction in the value of a futures contract as it approaches its expiration date. This can impact traders by reducing the potential profit or increasing the potential loss on the contract. Traders need to be aware of time decay and factor it into their trading strategies to minimize its negative effects.
What is future and forward contract?
Forwards Contract: 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 Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
How can i invest 8000 dollars?
You can trade on futures markets. You can use "trading signals" service for the first time. Please consider web site of Royal Futures ( http://www.royal-futures.eu ). They provide also brokerage services.
What time does the bond market close on New Year's Eve?
Cash bond markets at 2pm. Futures bond markets at 1pm.
Futures Trading in NSE BSE?
Futures Contract:A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values.An Example of a futures contract would be an agreement to 100 tonnes of Steel at Rs. 10000/- per tonne at some date say in December 2008. If no interim payments are made and if the price of Steel moves violently, a considerable credit risk could build up. To avoid this a margin system is used by the exchanges. As per the margin system, both parties must deposit a small sum with the exchange. This amount will be a small percentage of the total contract. This amount is called the initial margin. As the steel value changes, the contract value also changes. If the contract value changes, the margin must be topped up by an amount corresponding to the change in price of steel. The margin money is the property of the person who deposits it and would be returned to them if the contract gets cancelled/completed.Characteristics of Futures contract:1. They are traded in organized exchanges2. Credit risk is eliminated with the margin system. Both parties deposit a portion of the contract with the clearing house.3. Both the buyer and seller are bound by the contract terms and are expected to honour their end of the contract.Answer:Futures are derivatives that derive their value from an underlying asset. The National Stock Exchange or the NSE has much more volume of derivatives as compared to the Bombay Stock Exchange or the BSE. For F&O trading, NSE is where you should trade.
What is the impact of time decay on futures contracts?
Time decay refers to the gradual reduction in the value of a futures contract as it approaches its expiration date. This can impact traders by reducing the potential profit or increasing the potential loss on the contract. Traders need to be aware of time decay and factor it into their trading strategies to minimize its negative effects.
Why investors need to trade in commodity futures trading?
The advantages of futures trading, according to "Online Futures Trading - Advantages and Disadvantage" by Tim Wreford: Leverage. Futures operate on margin, meaning that to take a position only a fraction of the total value needs to be available in cash in the trading account. Commission Costs. Electronically traded futures contracts require no human intervention to match buys and sells unlike a traditional futures pit. This means that commission costs can be cut dramatically, leading to significant savings for the frequent trader. Liquidity. The involvement of speculators means that futures contracts are reasonably liquid. However, how liquid depends on the actual contract being traded. Electronically traded contracts, such as the e-mini's tend to be the most liquid whereas the pit traded commodities like corn, orange juice etc are not so readily available to the retail trader and are more expensive to trade in terms of commission and spread. Ability to go short. Futures contracts can be sold as easily as they are bought enabling a trader to profit from falling markets as well as rising ones. There is no 'uptick rule' for example like there is with stocks. No 'Time Decay'. Options suffer from time decay because the closer they come to expiry the less time there is for the option to come into the money. Futures contracts do not suffer from this as they are not anticipating a particular strike price at expiry. Automated trading. Electronic futures brokers offer the facility to programmers to interface directly with their trading software. This means that custom written trading software can automatically trade a strategy without any human intervention at all. A system can make buy/sell signals which are automatically routed to the exchange along with any stops and targets. Almost instant fills. With electronically traded futures there is no need to call up a broker and wait for a fill from the trading floor. Orders are instantly placed on the electronic order book and filled as soon as a match is found - for liquid contracts such as the emini S&P500 this will be within a second. Level playing field. With traditional pit traded futures the professional in the pit has a major advantage over the retail trader in terms of speed of execution and costs. Electronic futures trading offers all participants exactly the same advantages.
What is meant by the term commodities and futures?
Commodities are services and goods. Soft commodities are goods that are grown, hard commodities are goods that are mined. A futures is a contract to buy commodities or financial instrument set in certain time in the future. These contracts are traded.
Explain the difference between forward contracts and futures contracts?
Forwards Contract: 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 Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
Differences between a futures contract and a forward contract?
There are 3 different types of forward pricing: (1) Forward contracts (which include cash forward contracts, minimum price forward contracts and deferred pricing contracts) (2) Futures Contracts and (3) Option Contracts. A forward contract is an agreement between two parties to buy or sell an asset at an agreed future point in time. The trade date and delivery date are separated. A futures contract is a standardized forward contract that is traded on an exchange, like SAFEX. Other than forward contracts, futures contracts are not linked with specific buyers. The intermediary between buyers and sellers is a clearing house that ensures that contracts held for delivery are fulfilled. Options contract convey the right, but not the obligation, to buy (call option) or sell (put option) at a specified price during a specified period of time. The good traded in the market is not the actual commodity, but a futures contract. The farmer will receive a futures contract, which will carry an obligation to buy or sell at some specific future date, if he/she chooses to exercise the option.
How is Standard and Poors 500 Index's Fair Value calculated?
Since futures contracts on a market index expire only once a month, Fair Value is the Forward Value (at the time of a futures contract expiration) of an index spot price, where compounding takes into account time to expiration and dividends lost due to holding index futures rather than underlying stocks. If Fair Value before the open is lower than the futures contract price, you may expect that a market index will go higher after the opening bell.
What is future and forward contract?
Forwards Contract: 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 Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What are the similarities between a forward contract and afutures contract?
Forwards Contract: 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 Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What do you mean by future contract?
It is an agreement to buy or sell a standard quantity of a commodity or a security - such as gold, $US or bank bills of exchange - on a specific future date at an agreed price determined at the time the contract is traded on the futures exchange. It is a binding contract, enforceable at law. Futures contracts are traded by open outcry on the floors of most futures exchanges, although the computer age has seen the spread of screen trading.
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.
What is nifty future and how thay trade in future market?
Nifty Futures is also a financial instrument in which futures contracts are done on the basis of S&P Nifty index which is the benchmark of NSE. Nifty futures are a instrument type of market in which trading is done on the basis of the underlying index S&P CNX NIFTY. S&P CNX Nifty futures contracts have a maximum of 3-month trading cycle - the near month (1st ), the next month (2nd ) and the far month (3rd ). A new contract is introduced on the trading day following the expiry of the near month contract. The new contract will be introduced for three month duration. This way, at any point in time, there will be 3 contracts available for trading in the market i.e., one near month, one mid month and one far month duration respectively.
What if future contract expired?
Futures contracts expire all the time. When they do, someone will show up at your doorstep with nine truckloads of wheat and expect you to have money to pay for it. This is why I keep telling people "don't buy a futures contract if you don't use the underlying." If you are a speculator and you bought wheat futures at $6, and wheat dropped to $5, you are going to lose $5000 because I can almost guarantee you don't have any way to handle 5000 bushels of wheat.
