AREC 384 futures market

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The flashcards below were created by user hcunning on FreezingBlue Flashcards.


  1. contract
    document that specifies the terms of delivery for the product being traded
  2. delivery month
    month in which the product is to be delivered
  3. delivery point
    specific position to which product is to be delivered
  4. long position
    buyers of a futures contract are in a "long position"
  5. short position
    sellers of a futures contract are in a "short position"
  6. hedge
    taking an opposite position in the futures (or cash market) to shift (minimize) risk
  7. uncovered
    trades that do not have an offsetting position in the cash market
  8. settlement
    completing the terms of a futures contract at its expiration date. Number of ways to settle a futures contract
  9. ways to settle a futures contract
    • delivery
    • cash settlement
    • trade the contract (offsetting or lifting the hedge)
  10. basis
    • = cash price - (nearby) futures price
    • usually more predictable than cash or futures prices
  11. positive basis implies ...
    cash price > futures price
  12. negative basis implies ...
    cash price < futures price
  13. factors affecting the basis
    • cost of transportation
    • supply and demand conditions in cash market relative to delivery points for the futures market
    • quality differences in cash commodity and product specified in futures contract
    • quantity of stocks and storage space in cash market

Card Set Information

Author:
hcunning
ID:
324929
Filename:
AREC 384 futures market
Updated:
2016-10-26 00:30:33
Tags:
futures market economics
Folders:

Description:
lecture 11
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