What are futures? Tim Bennett explains the key features and basic principles of futures, which, alongside swaps, options and covered warrants, make up the derivatives market.
- What are derivatives? https://www.youtube.com/watch?v=Wjlw7ZpZVK4
- What are options and covered warrants? https://www.youtube.com/watch?v=3196NpHDyec
- What are futures? https://www.youtube.com/watch?v=nwR5b6E0Xo4
- What is a swap? https://www.youtube.com/watch?v=uVq384nqWqg
- Why you should avoid structured products https://www.youtube.com/watch?v=Umx5ShOz2oU
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So what your saying is that the contract states that someone has to sell another person something. Because you made it seem as if the contract explicitly says that the producer has to sell to the manufacturer. And if in fact that was the case, then the second contract would not have been honored if Audi sells to the Aluminum producer given the terms.
Good one !!
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when you close a trade and make a profit, the exchange would pay you first. A would get paid in cash by the exchange when he closed his trade. exchanges are financial institutions too that carry a lot of cash on their balance sheet to facilitate payout before getting payment from the losers.
of course if B refuses to close his trade and somehow gets hold of $4 of the underlying commodity and the exchange forces a clear out, then the exchange would have to buy $4 of said commodity from B. C will still get $2 in cash as the exchange is the party that can force a clear out so C has no obligation to buy the commodity if C closes his trade before the clear out.
if you consider the cash flow of all players to ever participate in an exchange, it's a negative sum game (zero sum - all commissions paid).
Excellent video, thank you! I also love extremely the English accent, it's super cool.
What I don't understand about this is: why the shorter that thinks the price going to drop, doesn't simply sell the contract at the current price? If he thinks the price is going to go below 10$, why not sell it now for 10$ instead of waiting some months?
You Explanations are easy to Understand.... by chance... here I Am watching this same VIDEO AGAIN... .. And I Have learn ... More about how fluid the market is... and How it takes someONE like you to help the STUDENT connect all the DOTS.... I Thank you ... GREAT FULL I AM
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1. The current market price depends on the current supply and demand. The prices in the video are all future prices.
2. As a rule, I have to buy (sell) the underlying, meat for example, from the other if I went the Future Long (short) before.
In many brokers, however, where small speculators play, the physical delivery of the goods is not possible. The broker then always closes the contract himself (see also the term "First Notice day")
Hi Tim, Your channel is simply brilliant. I have learned a lot from these, thanks a ton. Please keep it up.
I have a question which is haunting me for days. As you have mentioned the Futures price in a particular contract is fixed for the duration of the contract. Also these is a statement, that the futures price converges to the spot price as the delivery date approaches. These two statements are contradictory to me as far as the futures price is concerned. Can you please elaborate this and help me understand what I am missing here.
No, not the future price is fixed, but the agreed future price. I do not see the other participant. If the October Future is currently at $ 100 and I'm going futures long, the price is 110 tomorrow, I've gained 10%. The agreed price is then still $ 100. In fact, when we have October and the future expires, it has approached the spot market.
Oh, you're one of those people. Why even come here and watch the video? to complain? Those LAZY people obviously got the money to trade futures from working for it.
FYI, millionaires and billionaires with businesses who AREN'T lazy trade futures you imbecile....
CORRECTION; Please tell me something I am a little confused about.. 0 = where the futures market is. I sell an Calls Option at 4 for $500.Two weeks later the market is at 3 ( the Buy options value is $700)...if the Buyer decide to get out of his Calls position before market reaches 4... what will I lose? and what will I gain?
Please tell me something I am a little confused about.. 0 = where the futures market is. I sell an Option at 4 for $500.Two weeks later the market is at 3 ( the Buy options value is $700)...if the Buyer decide to get out of his Calls position before market reaches 4... what will I lose? and what will I gain?
If the seller had to pick up a ton for 3000$ and sell it for 2500$, hes - 500$, but then you say he buys back.the contract for 3000$, which means that he would be down another 500$, so all together it would be 1000$ he is down, not 500$.
The guy doing the video is charming. But why would you use a product that nobody can relate to in your example. It just adds a layer of complication to a subject we already do not understand. And if the producer is going to walk away $500 down why would he then buy the $3000 contract when he could just sell contract 1 and be $500 down. And what about the Market Maker? The ABC example would have been a perfect time to introduce the concept of the Market Maker. Does C not represent the Market Maker?
In a time of increasing change and uncertainty, we must be clear on what will not change to not get distracted.
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Dr. Ralph-Christian Ohr has been working in several innovation, division and product management functions for international, technology-based companies. His interest is aimed at organizational and personal capabilities for high innovation performance. He authors the Integrative Innovation Blog.
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Investors who have remained consistent with their risk profiles through volatile markets have seen a substantial recovery in their portfolios since March 2009. Those who are truly behind are those who panicked and are now left with the decision of how to recover their losses. They can, but it is a much slower recovery.
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