Investment Options

Future contract is normally defined as a standardized agreement with an organized exchange to buy or sell some item, such as a currency or commodity at a fixed price at a certain date in the future. Some contracts for example, foreign currency futures, provide for cash delivery; others, such as Eurodollar futures, are based on some reference price and allow only for cash settlement at maturity. The purpose of futures is not to obtain delivery but to replicate without credit risk, the gains or losses that would occur from an equivalent forward contract. In principle, currency futures are similar to foreign exchange forwards in that they are contracts for delivery of certain amount of a foreign currency at some future date and at known price. But in practice, most futures contracts are terminated before maturity. The most important uses of currency futures are listed below; 1. Hedging: Presume Entity A Continue reading

A commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity markets across the world trade in agricultural products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, pork bellies, oil, metals, etc.) and contracts based on them. These contracts can include spots, forwards, futures and options on futures. Other sophisticated products may include interest rates, environmental instruments, swaps, or ocean freight contracts. Commodity exchanges are institutions which provide a platform for trading in ‘commodity futures’ just as how stock markets provide space for trading in equities and their derivatives. They thus play a critical role in robust price discovery where several buyers and sellers interact and determine the most efficient price for the product. In India there are 21 regional exchanges and three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed Continue reading