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Learn about the following:

What futures contracts are. Where futures prices come from. How futures are used.
Why futures are different. Margins.

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Course Summary

Futures menuFutures explainedFutures pricing

Futures basisFutures clearing 1Futures clearing 2

  • 35 minutes
  • 9 question multiple choice test
  • What futures contracts are
  • Where futures prices come from
  • How futures are used
  • Why futures are different
  • Margins 

Futures Markets - the details

1. What are futures contracts?

  • Definition
  • Hedging and trading
  • Long and short positions
  • Tick value, profits and losses, example (Eurodollar)
  • Dealer’s risks and limits 

2. Futures prices

  • Spot, forward and the cost of carry, example
  • Arbitrage
  • The basis and basis trading

3. Why futures are different

  • Standardisation
  • Price transparency
  • Credit risk, the clearing house
  • Initial and variation margin
  • Comparison with over-the-counter products

4. Summary

5. Test

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A futures contract is an agreement between two parties to make an exchange of a commodity on an agreed date in the future but the price is agreed today. These are standardised contracts. This means that individual futures contracts are defined by the contract specifications. The specifications detail the contract size (amount being traded), exactly what is being traded, how the settlement price is determined and the date when settlement or delivery is to be made. This standardisation is a key part of futures. Both the buyer and seller know exactly what they are dealing in.


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