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PRINCIPLES OF
FUTURES - Coggle Diagram
PRINCIPLES OF
FUTURES
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settlement
Any outstanding contract, which has not been closed-out, must be settled at maturity.
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Trading Practicalities
Open Position vs Close out position
:check: open position When the trader hold the futures contract until the expiry date.
:check: close position Closing out a position means entering into the opposite type of trade from the original one.
Long Position vs Short Position
:check: long position is The long position agrees to buy the assets when the contract expires.
:check: short position agrees to sell the assets when the contract expires.
Maintenance Margin
Margin payment is a legal requirement for every participant, be it the buyer or seller.
Basis
Basis can be defined as the difference between the cash price (spot price) of the underlying instrument (physical) and the futures price (contract).
Convergence
Generally cash and futures price move in tandem, that is, they are moving in the same direction, though not by the same amount.
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Open Interest
Open interest refers to the number of outstanding contracts for a given contract month.