"Futures Contract" Essays and Research Papers

What is the difference between a long forward position and a short forward position? Ans: When the enters into a long forward contract, he/she is agreeing to buy the underlying asset for a certain price at a certain time in future. When the enters into a short forward contract, he/she is agreeing to sell the underlying asset for a certain price at a certain time in future. 2. Explain carefully the difference between hedging, speculation, and arbitrage. Ans: A trader hedges when he/she has an...

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Oman Crude Oil Futures Contract 1. Exchange: Dubai Mercantile Exchange 2. Trading Unit: 1,000 U.S. barrels (42,000 gallons) 3. Contract Value: The contract value shall be the Final Settlement Price multiplied by one thousand (1,000) multiplied by the number of Contracts to be delivered 4. Price Quotation: U.S. dollars and cents per barrel  5. Trading Symbol: OQD 6. Trading Hours : Electronic trading is open from 16:00 CST/CDT Sundays and from 17:00 CST/CDT Monday to Thursday and closes at 16:15...

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(a) Hedge? (b) Speculate? (c) Arbitrage? (d) None of the above Answer: (a), (b), (c) 3. During the growing season a corn farmer sells short corn futures contracts in an amount equal to her crop. If after harvesting and selling her crop she maintains the contracts, she is then considered a: (a) Hedger (b) Speculator (c) Arbitrager (d) None of the above Answer: (b)  4. A firm provides a service that benefits...

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income to commodities, and interest rates. Main features of financial derivatives. Financial derivatives have the following general characteristics, namely: Financial derivatives require very little initial investment compared to other types of contracts that have a similar response to changes in general market conditions. This phenomenon allows the investor to have higher profits and higher losses if the transaction is not developed as I thought. The value of the derivative changes in response...

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The usage of CPO futures Major group of users of CPO futures who are corporate users, institutional investors and individual investors used the CPO futures as a tool to hedge against a price increase or decline in palm oil or other close substitutes, such as soya or rapeseed oil in near future. CPO futures are also used as an alternative for holding physical palm oil until it is required in the physical market and they are traded in a directional market movement by buying low or selling high...

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Why do they call these contracts derivatives? Where is the optionality in these contracts? Weather derivatives structures commonly used are: i) cap - a call option; ii) Floor - a put option; iii) Collar - a put and a call option, usually with little or no premium; iv) Swap - a derivative with a profit and loss profile of a futures contract v) Digital option - an option that pays either a predetermined amount if acertain temperature or degree day level is reached, or nothing at all in other...

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The last few months you observed the market had a bullish pattern. However, today you believe that the index performance will decline in the near future. So you order your broker to short ten (10) KLCI futures at today’s market price. Assuming you are required to pay margin RM8500/contract and maintain 85% of it, commission is charged at RM102/contract. The table below is the Settlement index prices for the following trading days. Day | Today | 1 | 2 | 3 | 4 | Settlement Price (Index) | 1010...

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foreign currency futures and options. Identify situations where you may choose one or the other. When Barings Bank, the oldest merchant bank in London, collapsed in 1995 after one of the bank’s employees lost £827 million due to speculative investing, primarily in futures contracts, it illustrated the extreme danger and volatility of derivatives. Options and futures can be used to eliminate, reduce, hedge and manage risk, but can also be highly speculative. Foreign currency futures are standardized...

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CHAPTER 8 Currency Futures and Options Markets EASY (definitional) 8.1 Which one of the following currency futures contracts is currently NOT available? a) French franc b) Hungarian forint c) Czech koruna d) Norwegian krone Ans: a Section: Futures contracts Level: Easy 8.2 Which of the following has provided a major inducement for speculators to participate in the futures market? a) low margin requirements b) low bid‑ask spreads c) high volume compared to the forward market d)...

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S&P/ASX 200 futures contract is 10% and the stock index is currently 4400. Each contract has a multiplier of $25. How much margin must be put up for each contract sold? If the futures price falls by 1% to 4356, what will happen to the margin account of an investor who holds one contract? What will the investor’s percentage return based on the amount put up as margin be? The value of margin must be put up for each contract sold: 4400 x 25 x 10% =$11000 When the futures price fall 1%...

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