CHAPTER 2 Mechanics of Futures MarketsDrawback
The social gathering with a brief place in a
futures contract typically has choices as to the exact asset that can be
delivered, the place supply will happen, when supply will happen, and
so on. Do these choices enhance or lower the futures value? Clarify your
What are an important features of
the design of a brand new futures contract?
Clarify how margin shield traders
in opposition to the opportunity of default.
A dealer buys two July futures contracts
on frozen orange juice. Every contract is for the supply of 15,000 kilos. The
present futures value is 160 cents per pound, the preliminary margin is $6,000 per
contract, and the upkeep margin is $four,500 per contract. What value change
would result in a margin name? Underneath what circumstances might $2,000 be withdrawn
from the margin account?
Present that, if the futures value of a
commodity is bigger than the spot value throughout the supply interval, then there
is an arbitrage alternative. Does an arbitrage alternative exist if the futures
value is lower than the spot value? Clarify your reply.