In a futures contract there are two parties:
1.
The
long position, or buyer, agrees to purchase the underlying at a later date or
at the expiration date at a price that is agreed to at the beginning of the
transaction. Buyers benefit from price increases.
- The short position, or seller,
agrees to sell the underlying at a later date or at the expiration date at
a price that is agreed to at the beginning of the transaction. Sellers
benefit from price decreases.
# specification of futures of market:- Let’s review some of the specifications you might find in a
Commodity Futures contract
Contract
Size:Here
you find the size of the actual contract you are trading. In the case of
Soybeans we are looking at 5,000 bushels per contract. This is the
minimum amount you can trade for this particular contract. Unlike
Equities you cannot trade partial contract sizes.
Pricing
Unit:When
reading a price quote for this Commodity you need to know what the value
represents. Soybeans for example are priced in cents per bushel.
Daily
Price Limits:Some
Commodity Futures contracts, not all, have daily limits imposed by the
exchanges. These are prices set the previous day for the maximum amount
the market may rise or fall the next trading day. It is important to know
if the market you are trading has these limits.
Settlement
Procedure:This area
tells you if the Commodity Futures contract calls for physical delivery or cash
settlement. Physical delivery means you would have to deliver or take
delivery of the Contract if held until expiration.
Daily
Price Limits:Some
Commodity Futures contracts, not all, have daily limits imposed by the
exchanges. These are prices set the previous day for the maximum amount
the market may rise or fall the next trading day. It is important to know
if the market you are trading has these limits.
Position limit-pl are the maximum number of contract
that a speculater may hold.
Price quotes-the exchange specified the quotation
unit.the quation unit is simply the unit in which the price is specified.
0 Comments