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Forward contracts are very similar to futures contracts, except they are not marked to market, exchange traded, or defined on standardized assets. Forwards also typically have no interim partial settlements or "true-ups" in margin requirements like futures - such that the parties do not exchange additional property securing the party at gain and the entire unrealized gain or loss builds up while the contract is open. A forward contract arrangement might call for the loss party to pledge collateral or additional collateral to better secure the party at gain. (Wikipedia)
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Explain the difference between forward contracts and futures contracts?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What are the similarities between a forward contract and afutures contract?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What is the difference between a forward contracts futures contracts and options?
Forwards and futures are essentially the same thing: a commitment to buy/sell at a certain date for a certain price. The difference is in futures contracts you're also committed to sell a certain quantity, whereas in a forward you're not.An options contract gives you the option, but not the obligation, to buy or sell. This is great if you're working with stocks. If you have a futures contract to buy 500 shares of Coca-Cola for $10 per share on January 15 and Coke closed at $8 on January 15, you just lost a thousand dollars. If you were long on a put with the same spread between strike and stock prices, you made $1000.Forwards and futures have a purpose in life--IF you're dealing commodities with the intention to use them. You make frozen pies. You know you need ten tons each of wheat, sugar and apples. If you have a futures contract for October delivery on all of those commodities, you know what your pies' materials value is going to be, hence you can publish a good price for your pies. But futures speculators--investors who buy futures with the intent of selling the product after delivery, or the contract to a producer (there is a secondary market in futures)--have a long and proud history of losing their asses on these, so I recommend against them as an investment vehicle.
Explain the difference between a call option and a long position in a futures contract?
The only difference between a long call option and a long futures position is the derivative itself--one of them is an option, the other is a futures contract.
What are the differences between future and option contract?
There's one main difference and it's huge: An option contract gives the person who buys it the privilege of doing whatever it is the contract is written for. A futures contract imposes an obligation on the buyer. There are also liquidity requirements and requirements to pay performance bonds in futures trading that don't exist in options trading, but the real basic difference is that an options buyer can do something and a futures trader has to.
What is differences between currency future and currency future contracts?
"Futures" and "Futures contracts" are the same thing.
Basic difference between forward contract and future contract?
Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
Explain the difference between forward contracts and futures contracts?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What are the similarities between a forward contract and afutures contract?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What is future and forward contract?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What is the basic difference between a forward and future market?
A forward contract is a private and customizable contract that needs to be settled at the end of the agreement and is traded over the counter. A futures contract has standardized terms and is traded on an stock or commodity exchange, where prices are settled on a daily basis until the end of the contract.
What is the difference between a forward contracts futures contracts and options?
Forwards and futures are essentially the same thing: a commitment to buy/sell at a certain date for a certain price. The difference is in futures contracts you're also committed to sell a certain quantity, whereas in a forward you're not.An options contract gives you the option, but not the obligation, to buy or sell. This is great if you're working with stocks. If you have a futures contract to buy 500 shares of Coca-Cola for $10 per share on January 15 and Coke closed at $8 on January 15, you just lost a thousand dollars. If you were long on a put with the same spread between strike and stock prices, you made $1000.Forwards and futures have a purpose in life--IF you're dealing commodities with the intention to use them. You make frozen pies. You know you need ten tons each of wheat, sugar and apples. If you have a futures contract for October delivery on all of those commodities, you know what your pies' materials value is going to be, hence you can publish a good price for your pies. But futures speculators--investors who buy futures with the intent of selling the product after delivery, or the contract to a producer (there is a secondary market in futures)--have a long and proud history of losing their asses on these, so I recommend against them as an investment vehicle.
Explain the difference between a call option and a long position in a futures contract?
The only difference between a long call option and a long futures position is the derivative itself--one of them is an option, the other is a futures contract.
What is futures and option?
First of all, we need to distinguish between Futures and Options. Both are derivative instruments but futures are futures, options are options, they are not the same thing. Futures contracts are contracts that investors go into that agrees to trade the underlying asset for a fixed price in the future. Options contracts are contracts that gives the buyer of the contract the right but not the obligation to buy or sell the underlying asset at a fixed price. Both are very different and have their own characteristics. I would suggest you read about the differences between futures and options.Three popular derivatives are forwards, futures and options. A futures contract is an agreement to purchase a certain amount of a commodity for a price on a certain date. Say...100,000 bushels of wheat on August 1 for $5 per bushel. The very similar forwards contract is an agreement to purchase a commodity for a price on a certain date. The difference is the forwards contract doesn't say how much of it you're getting...a very important thing when you can't be sure just how big your crop will be. If Farmer Brown sells a futures contract for 100,000 bushels of wheat and harvests 90,000 bushels, he's got to come up with 10,000 bushels right away. Similarly, if he sells 100k and harvests 110k, he's got to contend with the vagaries of the open market for the rest of the crop. But by entering into a forwards contract he can deliver what he grew and not have many worries. Selling stock futures is really risky because if you sell a big futures position in Acme and the price does something you don't like, you'll lose money. Stock options are much better because if you bought the contract and you'll lose money by exercising it, you just let it expire.F&O stand for futures and options and though clubbed together, they don't mean the same thing. Future refers to a standardized contract that requires the delivery of an underlying asset, which could be a commodity, bond, currency, or a stock index, for a specified price at a predetermined date in the future. Options, on the other hand, are contracts that give the holder the right to buy or sell the underlying assets for a specified price during a specified period of time. The element of obligation, which is present in futures trading, is not there in the case of options. F&O trading can be very profitable for investors provided they are cued in to the stock markets. If you're a newbie F&O investor, it makes sense to consult a professional broker to get you started.
What is the origin of U.S. futures trading?
Following the creation of organized futures exchanges between 1850 and 1900, hedging with futures eventually became an integral component of portfolio management theory.
What are the differences between future and option contract?
There's one main difference and it's huge: An option contract gives the person who buys it the privilege of doing whatever it is the contract is written for. A futures contract imposes an obligation on the buyer. There are also liquidity requirements and requirements to pay performance bonds in futures trading that don't exist in options trading, but the real basic difference is that an options buyer can do something and a futures trader has to.
What is Future and Options trading?
First of all, we need to distinguish between Futures and Options. Both are derivative instruments but futures are futures, options are options, they are not the same thing. Futures contracts are contracts that investors go into that agrees to trade the underlying asset for a fixed price in the future. Options contracts are contracts that gives the buyer of the contract the right but not the obligation to buy or sell the underlying asset at a fixed price. Both are very different and have their own characteristics. I would suggest you read about the differences between futures and options.Three popular derivatives are forwards, futures and options. A futures contract is an agreement to purchase a certain amount of a commodity for a price on a certain date. Say...100,000 bushels of wheat on August 1 for $5 per bushel. The very similar forwards contract is an agreement to purchase a commodity for a price on a certain date. The difference is the forwards contract doesn't say how much of it you're getting...a very important thing when you can't be sure just how big your crop will be. If Farmer Brown sells a futures contract for 100,000 bushels of wheat and harvests 90,000 bushels, he's got to come up with 10,000 bushels right away. Similarly, if he sells 100k and harvests 110k, he's got to contend with the vagaries of the open market for the rest of the crop. But by entering into a forwards contract he can deliver what he grew and not have many worries. Selling stock futures is really risky because if you sell a big futures position in Acme and the price does something you don't like, you'll lose money. Stock options are much better because if you bought the contract and you'll lose money by exercising it, you just let it expire.F&O stand for futures and options and though clubbed together, they don't mean the same thing. Future refers to a standardized contract that requires the delivery of an underlying asset, which could be a commodity, bond, currency, or a stock index, for a specified price at a predetermined date in the future. Options, on the other hand, are contracts that give the holder the right to buy or sell the underlying assets for a specified price during a specified period of time. The element of obligation, which is present in futures trading, is not there in the case of options. F&O trading can be very profitable for investors provided they are cued in to the stock markets. If you're a newbie F&O investor, it makes sense to consult a professional broker to get you started.
