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Showing posts from February, 2017

Futures Market

What it is: Futures markets are places (exchanges) to buy and sell futures contracts. There are several futures exchanges. Common ones include The New York Mercantile Exchange, the Chicago Board of Trade, the Chicago Mercantile Exchange, the Chicago Board of Options Exchange, the Chicago Climate Futures Exchange, the Kansas City Board of Trade, and the Minneapolis Grain Exchange. How it works (Example): A futures contract is a financial contract giving the buyer an obligation to purchase an asset (and the seller an obligation to sell an asset ) at a set price at a future point in time. The assets often underlying futures contracts include commodities, stocks , and bonds . Grain, precious metals, electricity, oil, beef, orange juice,and natural gas are traditional examples of commodities, but foreign currencies, emissions credits , bandwidth and certain financial instruments are also part of today's commodity markets. There are two kinds of par...

Basics of Futures and Options

Futures and Options (F&O) is a famous phrase used by TV channels, web sites and in conversation nowadays but many of you many not familiar with the concept. Let me try and explain, in very simple terms. Firstly, let me confirm what you already know: That you can buy and sell stocks on an exchange, and prices of stocks vary every day, and perhaps every minute. You buy a stock hoping for future appreciation, and sell when you want to exit or book profits. This is called the “cash” or the “spot” market – that means, when you say “I will buy 100 shares of company X at Rs. 152” on a stock exchange, someone can sell it to you and you will get the shares “on the spot”. (Technically, you’ll get delivery after two days but that is really an administrative lag) You also pay money “on the spot” – that is, you will need to immediately pay the Rs. 15,200 in the example above. Futures Now, let me talk about the futures markets. A future is a derivative contract in which two p...