Basis of Difference Futures Forwards 1. Trading Trading in a competitive arena (recognized exchange). Traded by telephones or telex (OTC) 2. Size of Contracts Standardized in each futures market. Decided between buyer and seller. 3. Price of Contract Changes every …
The limitations of futures contracts are as follows: The fixing of quantity and delivery dates that is necessary for the future to be traded means that the customer’s risk may not be fully covered. Futures contracts may not be available …
There are many inherent advantages of trading futures over other investment alternatives such as savings accounts, stocks, bonds, options, real estate, and collectibles. Some of them are as follows: 1. Discovery of Prices: Due to its highly competitive nature, the …
1. Performance on a futures contract is guaranteed by a clearinghouse – a financial institution associated with the futures exchange that guarantees the financial integrity of the market to all traders. 2. The clearinghouse acts as the intermediary counterparty to …
Daily settlement price shall be the closing price of the Futures Contracts for the trading day or such other price as may be decided by the relevant authority from time to time. All futures contracts require that traders post margins …
The clearinghouse is an organization established with an objective to assist the process of settlement of various transactions related to derivatives, securities, and payments. The clearing house is authorized with the function to ensure that all trade transactions should take …
A standardized futures contract has a specific: 1. Underlying Instrument: The commodity, currency, financial instrument, or index upon which the contract is based; 2. Size: The amount of the underlying item covered by the contract; 3. Delivery Cycle: The specified …
The participants in the futures market are as follows: 1. Participants on General Basis i) Individual: Individual participants are sole trader or companies which are 90% owned or controlled by a sole-trader. Individual participants may only trade for themselves and …
Future contract can be broadly classified into: 1. Financial Futures: Financial futures are the futures contract to buy or sell a specific financial instrument at a specific future date and at a specified price. There are different types of financial …
The features of a futures contract may be specified as follows: 1. Trading on Organised Exchange: These are traded on an organized exchange like IMM, LIFFE, NSE, BSE, CBOT, etc. 2. Standardised Contract: These involve standardized contract terms, viz., the …