25556 Chapter Notes - Chapter 13: Futures Exchange, Price Discovery, Futures Contract
Document Summary
Future contracts - a contract to buy a speci c quantity o a commodity or nancial instrumental at speci ed price with delivery set at a speci ed time in the future. Future contracts can be traded before their settlement date allowing the traders to avoid the contract"s obligations and instead cash settle the contract. Deliverable contracts can be settle by an exchange of the contract item for the agreed price. The long position takes an o setting short position. The short position takes n o setting long position. These o setting trades close-out" the trader"s position and result in a pro t or loss depending on the di erence between the buying and the selling price. A trader may close-out their position at any time prior to the settlement date. Event most deliverable contracts are cash settled. Cash settlement overcomes the need for the futures market to arrange physical settlement.
