Futures Trading

Because of the liquidity of their market and the ease and relative cheapness of trading them, futures and other derivatives are often preferred to cash instruments, for both speculation and hedging. The essential considerations in futures trading are the volatility of the associated commodity or financial instrument and the leverage deriving from the fact that the margin required to establish a futures position is a very small percentage of the contracts notional value. 

Traders can also bet on their interest rate views using a cash-market product or a forward rate agreement (FRA)—a contract specifying the rate to be received or paid starting at a specified future date. Transactions are easier and cheaper, however, on the futures exchange, because of the low cost of dealing there and the liquidity of the market and narrow price spreads. 

More common than directional bets are trades on the spread between the rates of two different contracts. Consider FIGURES 18.1 and 18.2, both of which relate to the prices for the CME Eurodollar contract on March 24, 2004 (contracts exist for every month in the year). 

Traders who believe the cost of carry will decrease can sell the spread to exploit this view. Those with longer time horizons might trade the spread between the short-term interest rate contract and the long bond future. 

D = the duration of the bond represented by the long bond contract p/= the price of the bond futures contract 

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Commodity Futures Trading Commission. (1997). Futures and Options What You Should Know Before You Trade. Washington, DC Author. 

Several methods and procedures have been developed aiming at the detection of the same food derived from modern biotechnology. This has repeatedly caused problems in trade, as analytical results generated in different laboratories did not concur. It is of high importance to achieve a level of standardization of analytical methods, prevents any future trade disputes due to incompatibility of analytical methods. 

Acknowledging the problems associated with defining future allocations as a function of output levels in the past, some governments have declared that they will not allow the use of updating. Such an announcement s credibility can be enhanced if accompanied by a clear outline of the allocations approach in future trading periods. 

Future trade information http //www.framtidahandel.se/index.php link=67 Environmental Requirements for Chemicals in Products - a guide for purchases. KemI 2006. also available at http //www.kemi.se/upload/Trycksaker/Pdf/ Broschyrer/KemikaIieguide eng.pdf... 

Natural Futures. Trade in Natural Products Market Access, lUCN, PhytoTrade, Regional Trade Falicitation Prograimne (RTFP) and Department for International Development (DFID). 

As an example, in March 2003 bond options expiring in April, May, June, and September were all available. The first three were exercisable into the June futures contracts, while the last one was exercisable into the September futures contract. Although all four expiry dates were theoretically available, only those options exercisable into the front futures contract (the next one to mature) were liquid. On 7 March 2003, the front contract was the June 2003 future, and over 99% of all futures trades and 99.9% of bond options trades involved this contract. Exhibit 17.7 provides a breakdown of these figures, showing the total number of contracts traded on that day. 

When the x% probability VaR (portfolio versus index) is calculated for the desired confidence level, the portfolio s daily return should not lag that of the index by that amount on more than x% of trading days. For instance, if the 5% daily VaR equals 0.04%, the portfolio s daily return should lag the index s daily return by 0.04% or more on approximately 5% of the future trading days. 

Lyons (1996) gives testable hypotheses connected to TCE and examines empirical relevance. As a conclusion of his paper, he states ... the formal law of contract is only limited relevance for many on-going business relationships, where reputation is a powerful enforcement mechanism . However, he encourages more empirical work ...to distinguish the roles of expected future trade and social norms as forces supporting reputation. (Lyons, 1996 49). The vertical integration, or make-or-buy, decision has been the most extensively studied question in the empirical transaction cost literature (Shelanski and Klein, 1995 Crocker and Masten, 1996). 

Aside from how they are constructed and traded, the most significant difference between forwards and futures, and the feature that influences differences between their prices, concerns their cash flows. The profits or losses from futures trading are realized at the end of each day. Because of this daily settlement, at expiration all that needs to be dealt with is the change in the contract value from the previous day. With forwards, in contrast, the entire payout occurs at contract expiry. (In practice, the situation is somewhat more complex, because the counterparties have usually traded a large number of contracts with each other, across a number of maturity periods and, perhaps, instruments, and as these contracts expire, they exchange only the net loss or gain on the contract.)... 

Option trading on an exchange, like futures trading, involves the daily computation and transfer of margin. Each exchange has its own procedures. 

All design values were notional and a range of values were being evaluated. These values were based on preliminary functional requirements and objectives provided by NASA-JPL. For all of the key driving requirements, future trade studies would have been performed to obtain reactor and reactor plant requirements and constraints. 

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