Trading on FUTURES markets - Iordachi Victoria

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1. Trading mechanism of futures contracts. 2. Price‘s formation and financial settlements on futures markets. 3. Futures strategies. Hedging examples by means of futures contracts. 1. Trading mechanism of futures contracts. A futures contract is a legally binding agreement to buy or sell a specific commodity, such as soybeans, or financial instrument, such as silver or the Euro, on a particular date in the future at an agreed upon price. Futures belong to a category of financial instruments known as derivatives, because their prices are derived from the value of other, underlying instruments, items, or products. In the case of futures, commodities of various kinds are the products underlying the contracts. Except for the contract price, all futures contracts have standard terms and conditions, which are non-negotiable. The exchange on which a particular commodity is traded sets the terms of its contracts. Although the same commodity may trade on multiple futures exchanges, there is usually o ne exchange, with its one standard contract, that dominates each commodity market. However, competition among exchanges is increasingly offering traders additional choices. Futures contracts formalized the forward contract process, imposing standard contract terms for grade or quality, quantity, time, and location. With the imposition of standard delivery specifications, it became possible to trade contracts on an organized exchange, creating a futures marketplace. The assets‘ support for the futures contract can be in form of:  State securities;  Currency;  Commodity;  SE indexes, interest rates, etc. ...