What Is a Futures Contract?
Both sides are obliged to follow through; it is used to move price risk from one party to another (CFTC glossary).
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1.What is a futures contract?
Both sides are obliged to follow through; it is used to move price risk from one party to another (CFTC glossary).
2.What does a hedger do?
Each side trades a possible gain for a known price; some traders hedge, others speculate and accept the risk.
3.Leo and Marge agree on 1,000 bushels at 6.00. What is the total?
1,000 bushels, delivered in three months, at 6.00 each, which is 6,000 in total.
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Sources (3)
- U.S. Commodity Futures Trading Commission (CFTC): Glossary (Futures Contract, Hedger, Speculator, Margin, Initial Margin, Margin Call, Mark-to-Market, Settlement Price, Offset, Delivery, Clearing Organization, Leverage)
- 17 CFR 1.55 (CFTC): Public disclosures by futures commission merchants, Risk Disclosure Statement
- Eigene Rechnungen: Bauer
Education only. Not financial advice.