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COMMODITY EXCHANGES : NCDEX
| NMCEIL |
MCX | Bullion
Market
AGRO PRODUCTS : Basmati Rice | Castor Oil | Chana | Coffee | Cotton | Crude Oil | Gaur | Gur | Jeera | Jute | Maize Mustard | Peas | Pepper | Red Chilli | Rice | Rubber | Soyabean | Sugar | Turmeric | Urad | Wheat METAL PRODUCTS : Copper | Gold | Silver | Steel Definition
of a "Commodity" |
Commodity
Exchanges | Derivatives
| Types
of traders in a derivatives market |
Definition of
future contracts Definition of future contracts Future contracts is
an agreement made and traded on the exchange between two parties to buy
or sell a commodity at a particular time in the future for a pre-defined
price. Since both the parties are unaware of each other, the exchange
provides a mechanism to give the party assurance of honoured contract.
The exchange specifies standardized features of the contract. The risk
to the holder is unlimited, and because the pay off pattern is
symmetrical, the risk to the seller is unlimted as well. Money lost and gained by each party on a futures contract are equal and opposite. In other words, futures trading is a zero-sum game. These are basically forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. These are regulated by overseeing agencies, and are guaranteed by clearinghouses. Hedgers often trade futures for the purpose of keeping price risk in check. Future contracts are often used by commercial enterprises as hedging tools to reduce the risk of expected future purchases or sales of the underlying asset. If used to speculate, risk increases. So risk depends on the underlying instrument and the use of the future. Advantages of Futures Contracts
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