Intro-Futures_03

Intro-Futures_03 - An Introduction to Futures By Dr....

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By Dr. Fernando Diz An Introduction to Futures
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Objectives Understand the mechanics of futures  contracts. Learn how to read futures quotations in  the newspaper. Understand the differences between  futures and forward contracts.  How to get “out” of a futures position. Calculate the notional value and leverage  of a futures contract.
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Futures Contracts Futures contract :  an agreement that  obligates   the party who agrees to buy, to  take delivery of a specified commodity and  pay the specified contract price  (forward  price) at an agreed upon time  (maturity or  settlement date).
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Three Elements of a Futures Contract 1 The commodity  and quantity  that will be  exchanged. 2 The exchange price  for the commodity at  the settlement time (futures price). 3 The time  when the exchange will take  place (expiration date)
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Reading Futures Prices Quotes Commodity Expiration Quantity Futures price in cents per lb. Exchange where it trades
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Distinctions Between Futures and Forward Contracts 1 1 Futures trade on organized exchanges,  forward contracts trade in “over-the- counter” markets.
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Distinctions Between Futures and Forward Contracts 2 2. Futures Contracts have standardized contract  terms, forward contracts are customized. Features Typically Standardized: Quantity Quality Expiration Delivery terms Delivery dates Minimum price fluct Daily price limits Trading days & hours
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The Market : NYMEX Division, New York Mercantile Exchange Began Trading November 1978 Trading Hours Floor hours : 9:50 a.m. to 3:10 p.m. (Eastern) NYMEX ACCESS(sm) hours : Sunday: 7:00 p.m. to 8:00 a.m. (Eastern) Monday to Thursday: 4:00 p.m. to 8:00 a.m.(Eastern) Contract Unit 42,000 gallons (1,000 U.S. barrels) Delivery Months 18 consecutive months Ticker Symbol/Quotation Symbol
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This note was uploaded on 02/09/2010 for the course FIN 459 taught by Professor Yildary during the Spring '07 term at Syracuse.

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Intro-Futures_03 - An Introduction to Futures By Dr....

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