Category: Digital Skills , Learning , What is. We offer a diverse selection of courses from leading universities and cultural institutions from around the world. These are delivered one step at a time, and are accessible on mobile, tablet and desktop, so you can fit learning around your life.
You can unlock new opportunities with unlimited access to hundreds of online short courses for a year by subscribing to our Unlimited package. Build your knowledge with top universities and organisations. Learn more about how FutureLearn is transforming access to education. Learn more about this course. How does the futures market work? This article examines aspects of the futures market, including one of its most important features: mark to market. Share this post. Just Awesome. Visit the course.
It was great. Yes, it was really appropriate 11 Sep, Yes, it was really appropriate and the content was excellent. Excellent 29 Jun, I really enjoyed the Risk 09 Jun, This gives them control of 1, barrels of oil. Rather, the broker only requires an initial margin payment, typically of a few thousand dollars for each contract. The profit or loss of the position fluctuates in the account as the price of the futures contract moves.
If the loss gets too big, the broker will ask the trader to deposit more money to cover the loss. This is called maintenance margin. The final profit or loss of the trade is realized when the trade is closed. A futures contract gets its name from the fact that the buyer and seller of the contract are agreeing to a price today for some asset or security that is to be delivered in the future.
These two types of derivatives contract function in much the same way, but the main difference is that futures are exchange-traded and have standardized contract specifications. These exchanges are highly regulated and provide transparent contract and pricing data.
Forwards, in contrast, trade over the counter OTC with terms and contract specifications customized by the two parties involved. Unless the contract position is closed out prior to its expiration, the short is obligated to make delivery to the long, who is obligated to take it. Depending on the contract, the values exchanged can be settled in cash.
Most often, the trader will simply pay or receive a cash settlement depending on whether the underlying asset increased or decreased during the investment holding period. In some cases, however, futures contracts will require physical delivery. In this scenario, the investor holding the contract upon expiration would be responsible for storing the goods and would need to cover costs for material handling, physical storage, and insurance.
Speculators can use futures contracts to bet on the future price of some asset or security. Hedgers use futures to lock in a price today to reduce market uncertainty between now and the time that good is to be delivered or received.
Arbitrageurs trade futures contracts in or across related markets, taking advantage of theoretical mispricings that may exist temporarily. Depending on your broker and your account status with that broker, you may be eligible to trade futures.
You will require a margin account and be approved to do so. Qualified traders in the U. CME Group. Commodity Futures Trading Commission.
Energy Trading. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Introduction to Futures. Overview of Futures Products. How to Trade Futures. Futures Trading Considerations.
Table of Contents Expand. What Is a Futures Contract? Only an FCM can do this. For this reason, a futures broker needs to team up with an FCM in order to provide order execution services to its customers. The Futures Commission Merchant [ Back to the top ] The Futures Commission Merchant FCM is responsible for holding customer funds of the margin account, clearing the futures trade, and performing all back-office recording functions such as marking-to-market a customer's futures account, sending trade confirmations and account summaries, and year-end tax forms.
The Clearing Corporation [ Back to the top ] The clearing corporation guarantees the performance of every buyer and seller of a futures or options contract.
In a literal sense, it stands as a buyer to every seller and a seller to every buyer. That means that a futures trader does not have to worry about any default of a futures counterparty. What happens if that person cannot pay?
Does A sacrifice her profit? The answer is "NO". The clearing corporation guarantees the transaction. The clearing corporation's elimination of such counterparty credit risk provides a great benefit to the futures and options markets. One may wonder how the clearing corporation does this.
The answer lies in the margin deposit that every other futures trader must make before trading any contract. This margin is available to the clearing corporation and, together with other reserve cash and various protection funds, are used to cover any customer default.
0コメント