INTRODUCTION :
when we enter the world of finance and investing we generally see four sections of derivatives namely – FUTURE, OPTIONS, sWAPS, and FORWARDS, all of these derivatives have their ways of executing in the markets, the more we learn about them the better it becomes for us to understand the dynamics of the market.
UNDERSTANDING FUTURE CONTRACTS
future contracts: as we know a future contract is an agreement between two parties to sell or buy the future of any security according to the modes of exchange clearing houses, it generally works on a simple principle when the majority of traders or investors buy(long) the future then the price tends to go up and when majority of investor or trader plans to sell (short) the future then the prices tends to go down.
future contracts are generally applicable for stocks, indexes, currency, commodities, and interest rates, investors and traders generally use future contracts to observe the trend and conditions of the market to invest. in this blog, we will discuss the contracts of futures in detail.
SPECIFICATIONS OF FUTURES CONTRACT
CLOSING OUT POSITIONS
the vast majority of futures contracts do not lead to delivery. the reason is that most traders choose to close out their positions prior to the delivery period specified in the contract.
closing out a position means entering into the opposite trade to the original one now for example: a trader who bought a September index futures contract on June 5th can close out the position by selling one September futures contract on July 20 ( since the delivery date was on September end the trader didn’t waited onto it).
in each case, the traders total gain or loss is determined by the change in the futures price between june 5 and the day when contract is closed out.
THE CONTRACT SIZE: the contract size specifies the amount of asset that has to be delivered under one contract. this is an important decision for the exchange as well. if the contract size is too large many traders who wish to hedge relatively small exposure or who wish to take relatively small speculative positions will be unable to use the exchange.( during such times they use the derivative called swaps – which is used for macro level form , you can watch it on the movie “BIG SHORT”)
THE DELIVERY MONTHS: a futures contract is referred to by its delivery month. the change must specify its precise period since for different futures the dates are different. the delivery months may vary from contract to contract and are chosen by exchange to meet the needs of market participants.
PRICE LIMITS AND POSITION LIMITS OF CONTRACTS
for most contracts, daily price movement limit are specified by the exchange. if in a day the price moves down previous day close by an amount equal to the daily price limit, then the contract is said to be limit down. if it moves up by the limit it is said to be limit up.
a limit move is a move in either direction equal to the daily price limit. normally trading ceases for the day if the contract touches the limit up or limit down once, however in some instances the exchange has the authority to step up and change its limit range.
CONVERGENCE OF FUTURE PRICE TO SPOT PRICE
as the delivery period for a future contract approached, the future price converges( gets equal) to the spot price of the underlying asset.when the delivery period is reached the future price equals or very close to spot price.
- SELL ( SHORT) A FUTURE CONTRACT
- BUY ( LONG ) A FUTURE CONTACT
- MAKE DELIVERY OF A FUTURE CONTRACT
relationship between futures price and spot price as the delivery period is approached
CONCLUSION
this is the details about future contract wheather you trade in stock future or index future the process remains same , if you all like the process then please comment below so that we can upload the articles on other derivatives as well.
click here if you want to know more about inflation , delfaltion and stagflation .
[…] intentionally didn’t blog any article after my Future trading one, the reason being markets were too volatile and I was relatively busy managing my Investor’s […]
Your blog is a treasure trove of valuable insights and thought-provoking commentary. Your dedication to your craft is evident in every word you write. Keep up the fantastic work!
I just wanted to express my gratitude for the valuable insights you provide through your blog. Your expertise shines through in every word, and I’m grateful for the opportunity to learn from you.
thank you!
Great website. A lot of useful information here. I’m sending it to some pals ans additionally sharing in delicious. And obviously, thanks in your effort!
You got a very superb website, Glad I discovered it through yahoo.
Hello just wanted to give you a brief heads up and let you know a few of the images aren’t loading correctly. I’m not sure why but I think its a linking issue. I’ve tried it in two different internet browsers and both show the same results.
Hiya, I am really glad I’ve found this info. Today bloggers publish only about gossips and internet and this is really annoying. A good site with interesting content, that is what I need. Thank you for keeping this website, I’ll be visiting it. Do you do newsletters? Can not find it.
Exactly what I was searching for, appreciate it for putting up.
It is really a great and helpful piece of information. I am glad that you just shared this helpful information with us. Please keep us up to date like this. Thank you for sharing.
You have brought up a very good details , regards for the post.
There is obviously a bunch to realize about this. I think you made various nice points in features also.
I believe that is among the such a lot significant information for me. And i’m satisfied studying your article. But want to observation on some general things, The site style is perfect, the articles is actually excellent : D. Just right task, cheers
Hello! Someone in my Facebook group shared this website with us so I came to check it out. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this to my followers! Outstanding blog and fantastic design.
Hi there very cool website!! Guy .. Beautiful .. Amazing .. I’ll bookmark your site and take the feeds additionally…I am glad to seek out so many helpful information right here in the publish, we’d like develop extra techniques in this regard, thanks for sharing. . . . . .
Just about all of what you mention happens to be supprisingly precise and it makes me wonder why I hadn’t looked at this with this light previously. This particular article truly did switch the light on for me personally as far as this specific subject matter goes. Nevertheless there is 1 point I am not necessarily too comfortable with so while I attempt to reconcile that with the actual main idea of the issue, allow me see exactly what the rest of the readers have to say.Well done.
naturally like your website but you have to take a look at the spelling on several of your posts. A number of them are rife with spelling issues and I to find it very bothersome to inform the truth however I will certainly come back again.
You have mentioned very interesting points! ps decent internet site. “We make ourselves a ladder out of our vices if we trample the vices themselves underfoot.” by Saint Augustine.
When I initially commented I clicked the -Notify me when new comments are added- checkbox and now every time a comment is added I get 4 emails with the identical comment. Is there any approach you may remove me from that service? Thanks!
As a Newbie, I am continuously searching online for articles that can help me. Thank you
Hola! I’ve been following your web site for a while now and finally got the courage to go ahead and give you a shout out from Huffman Texas! Just wanted to say keep up the excellent job!
You are a very intelligent person!
This is a topic close to my heart cheers, where are your contact details though?
Hello. Great job. I did not anticipate this. This is a excellent story. Thanks!
Hey there! Someone in my Facebook group shared this site with us so I came to look it over. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this to my followers! Outstanding blog and superb style and design.
hi!,I like your writing very a lot! share we communicate more approximately your post on AOL? I need an expert in this area to solve my problem. Maybe that’s you! Having a look ahead to peer you.
I am perpetually thought about this, appreciate it for putting up.
Some truly nice and utilitarian info on this internet site, likewise I believe the pattern contains wonderful features.
Wow that was strange. I just wrote an extremely long comment but after I clicked submit my comment didn’t appear. Grrrr… well I’m not writing all that over again. Anyways, just wanted to say excellent blog!
Hello my loved one! I wish to say that this article is amazing, great written and include almost all vital infos. I¦d like to look extra posts like this .
I haven’t checked in here for some time because I thought it was getting boring, but the last several posts are great quality so I guess I’ll add you back to my daily bloglist. You deserve it my friend 🙂
Hi my friend! I wish to say that this post is awesome, nice written and come with approximately all significant infos. I’d like to peer more posts like this .
Hey very nice blog!! Man .. Beautiful .. Amazing .. I’ll bookmark your website and take the feeds also…I’m happy to find numerous useful information here in the post, we need develop more techniques in this regard, thanks for sharing. . . . . .
You have noted very interesting details! ps decent site. “Great opportunities to help others seldom come, but small ones surround us every day.” by Sally Koch.
Hey! This post couldn’t be written any better! Reading this post reminds me of my old room mate! He always kept chatting about this. I will forward this post to him. Fairly certain he will have a good read. Thanks for sharing!
Thank you for another wonderful post. Where else could anybody get that type of info in such a perfect way of writing? I have a presentation next week, and I am on the look for such info.
Its fantastic as your other articles : D, thankyou for putting up.
I love your blog.. very nice colors & theme. Did you create this website yourself or did you hire someone to do it for you? Plz respond as I’m looking to design my own blog and would like to know where u got this from. appreciate it
Hey there, I think your blog might be having browser compatibility issues. When I look at your blog in Safari, it looks fine but when opening in Internet Explorer, it has some overlapping. I just wanted to give you a quick heads up! Other then that, superb blog!
Exactly what I was searching for, thankyou for posting.
Thanks for sharing superb informations. Your site is so cool. I’m impressed by the details that you have on this blog. It reveals how nicely you understand this subject. Bookmarked this website page, will come back for extra articles. You, my friend, ROCK! I found simply the information I already searched everywhere and simply could not come across. What a perfect site.
You have brought up a very fantastic details , regards for the post.
Excellent beat ! I would like to apprentice whilst you amend your site, how can i subscribe for a weblog website? The account aided me a appropriate deal. I were a little bit acquainted of this your broadcast offered vibrant transparent idea
I’ve been absent for some time, but now I remember why I used to love this web site. Thank you, I’ll try and check back more often. How frequently you update your web site?
Your place is valueble for me. Thanks!…
Thanks, I have recently been looking for info about this topic for a long time and yours is the greatest I have discovered till now. However, what about the conclusion? Are you certain in regards to the supply?
I like this web blog so much, saved to fav. “Respect for the fragility and importance of an individual life is still the mark of an educated man.” by Norman Cousins.
The next time I read a blog, I hope that it doesnt disappoint me as much as this one. I mean, I know it was my choice to read, but I actually thought youd have something interesting to say. All I hear is a bunch of whining about something that you could fix if you werent too busy looking for attention.
I truly prize your piece of work, Great post.
This blog is definitely rather handy since I’m at the moment creating an internet floral website – although I am only starting out therefore it’s really fairly small, nothing like this site. Can link to a few of the posts here as they are quite. Thanks much. Zoey Olsen
I am glad to be a visitant of this complete website! , regards for this rare information! .
It is truly a great and helpful piece of information. I¦m satisfied that you shared this helpful information with us. Please keep us up to date like this. Thank you for sharing.
Hello. excellent job. I did not anticipate this. This is a splendid story. Thanks!
This is really interesting, You’re an overly professional blogger. I have joined your rss feed and sit up for seeking more of your magnificent post. Additionally, I have shared your site in my social networks!
You actually make it seem so easy with your presentation but I find this matter to be really something which I think I would never understand. It seems too complex and extremely broad for me. I am looking forward for your next post, I’ll try to get the hang of it!
Excellent read, I just passed this onto a colleague who was doing a little research on that. And he just bought me lunch because I found it for him smile Therefore let me rephrase that: Thanks for lunch!
You got a very superb website, Sword lily I discovered it through yahoo.
You are my aspiration, I have few web logs and very sporadically run out from brand :). “Actions lie louder than words.” by Carolyn Wells.
I truly wanted to make a note so as to say thanks to you for the pleasant secrets you are giving on this site. My extended internet search has now been honored with pleasant concept to go over with my family and friends. I ‘d express that most of us website visitors actually are extremely lucky to live in a fine community with so many outstanding people with valuable tricks. I feel quite grateful to have encountered the site and look forward to tons of more fabulous times reading here. Thank you once again for all the details.
I don’t ordinarily comment but I gotta state regards for the post on this great one : D.
F*ckin’ amazing things here. I am very glad to see your post. Thanks a lot and i am looking forward to contact you. Will you please drop me a mail?
But wanna remark on few general things, The website style is perfect, the content is real superb. “If a man does his best, what else is there” by George Smith Patton, Jr..
Im not certain the place you are getting your information, but great topic. I needs to spend a while studying much more or working out more. Thanks for fantastic info I used to be in search of this info for my mission.
Thanks for all your efforts that you have put in this. very interesting information.
Howdy very cool website!! Guy .. Excellent .. Amazing .. I’ll bookmark your website and take the feeds additionally?KI’m glad to seek out a lot of helpful information here in the post, we’d like work out more techniques in this regard, thanks for sharing. . . . . .