Futures Trading requires: A Futures Clearinghouse-stands between all buyers and sellers to quarantee that all trades are honored Daily resettlement of Contracts -An initial margin of 3 to 10%o of the contract's value is paid up front. A maintenance margin is required. Any end-of-day losses must be replenished by the contract holder
• A Futures Clearinghouse - stands between all buyers and sellers to guarantee that all trades are honored. • Daily Resettlement of Contracts - An initial margin of 3% to 10% of the contract’s value is paid up front. A maintenance margin is required. Any end-of-day losses must be replenished by the contract holder. Futures Trading Requires:
Types of futures Contracts Commodity Futures- agricultural commodities(corn, wheat, orange juice, etc. )as well as metals, wood products and fibers. Financial futures futures contracts on Treasury bills, notes and bonds, GNMAS。CDS Eurodollars, foreign currencies, and stock indices
Types of Futures Contracts • Commodity Futures - agricultural commodities (corn, wheat, orange juice, etc.) as well as metals, wood products and fibers. • Financial Futures - futures contracts on Treasury bills, notes and bonds, GNMAs, CDs, Eurodollars, foreign currencies, and stock indices
Financial futures Interest Rate Futures- used to hedge risks associated with interest rate fluctuations For example, Treasury bond futures may allow a firm to lock in an interest rate for their bond issue
Financial Futures • Interest Rate Futures - used to hedge risks associated with interest rate fluctuations. • For example, Treasury bond futures may allow a firm to lock in an interest rate for their bond issue
Financial futures Foreign Exchange futures used to hedge risks associated with exchange rate fluctuations A firm can use a foreign exchange futures contract to lock in an exchange rate for a future transaction
• Foreign Exchange Futures - used to hedge risks associated with exchange rate fluctuations. • A firm can use a foreign exchange futures contract to lock in an exchange rate for a future transaction. Financial Futures
Financial futures Stock Index futures- used to hedge risks associated with equity market fluctuations. Investors can buy and sell contracts based on the s&p 500 and other market indices
• Stock Index Futures - used to hedge risks associated with equity market fluctuations. • Investors can buy and sell contracts based on the S&P 500 and other market indices. Financial Futures