lecture 24 - Prof Irvine FINA 4310 Prof Irvine FINA 4310...

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Unformatted text preview: Prof Irvine FINA 4310 Prof Irvine FINA 4310 Lectures 24 Futures Prof Irvine FINA 4310 Prof Irvine FINA 4310 What is a future? l An future is a standardized agreement to exchange a commodity in the future for a price that is decided today (the futures price) Prof Irvine FINA 4310 Prof Irvine FINA 4310 Futures Terminology l Agree to take delivery Long Pay futures price l Agree to deliver - Short Receive futures price l Key Elements Futures vs. Spot Contract Multiple Expiration Cash Settle Prof Irvine FINA 4310 Prof Irvine FINA 4310 Wall Street Journal Futures Price Quotes Open Open High Low Settle Change High Low Interest July 179 180 178 178-1 312 177 2,837 Sept 186 186 184 186- 280 184 104,900 Dec 196 197 194 196- 291 194 175,187 Sept 117-05 117-21 116-27 117-05 +5 131-06 111-15 647,560 Dec 116-19 117-05 116-12 116-21 +5 128-28 111-06 13,857 Sept 11200 11285 11145 11241-17 11324 7875 18,530 Dec 11287 11385 11255 11349-17 11430 7987 1,599 Corn (CBT) 5,000 bu.; cents per bu. TREASURY BONDS (CBT) - $1000,000; pts. 32nds of 100% DJ INDUSTRIAL AVERAGE (CBOT) - $10 times average Lifetime Prof Irvine FINA 4310 Prof Irvine FINA 4310 Trading Mechanics l Clearinghouse - acts as a party to all buyers and sellers. Obligated to deliver or supply delivery l Closing out positions Reversing the trade Take or make delivery Most trades are reversed and do not involve actual delivery Prof Irvine FINA 4310 Prof Irvine FINA 4310 Trading With and Without a Clearinghouse Prof Irvine FINA 4310 Prof Irvine FINA 4310 Margin and Trading Arrangements Initial Margin - funds deposited to provide capital to absorb losses Marking to Market - each day the profits or losses from the new futures...
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This note was uploaded on 06/05/2011 for the course FINA 4310 taught by Professor Staff during the Fall '08 term at University of Georgia Athens.

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lecture 24 - Prof Irvine FINA 4310 Prof Irvine FINA 4310...

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