A commodity contract is a binding agreement involving the receipt or delivery of a commodity at a future date, often used in trading and risk management.
The delivery date is an important term used in various financial transactions, specifically in futures contracts and regular way transactions. Understanding this concept is crucial for participants in financial markets.
Financial futures refer to standardized futures contracts that involve financial assets such as currencies, interest rates, or other financial instruments. These contracts are exchange-traded and play a vital role in hedging and portfolio management.
A forward contract involves the actual purchase or sale of a specified quantity of a commodity, government security, foreign currency, or other financial instrument at a price agreed upon now, with delivery and settlement at a future specified date.
Forward dealing involves transactions in commodities, securities, currencies, freight, etc., for future delivery at a price agreed upon at the time the contract is made. This type of trading enables dealers and manufacturers to hedge future requirements.
A futures contract is a standardized legal agreement to buy or sell a particular commodity, currency, or financial instrument at a predetermined price at a specified time in the future. Unlike options, futures contracts entail a mandatory obligation to execute the transaction.
A futures option is a derivatives contract that grants the holder the right, but not the obligation, to buy or sell a futures contract at a predetermined price before the option expires.
A hedge is a financial transaction designed to mitigate the risk of other financial exposures by balancing potential losses with gains in other financial instruments.
A spot commodity is a commodity traded with the expectation that it will actually be delivered to the buyer, as contrasted with a futures contract, which will usually expire without any physical delivery taking place. Spot commodities are traded in the spot market.
A market that deals in commodities or foreign exchange for immediate delivery. Immediate delivery in foreign currencies usually means within two business days. For commodities, it typically means within seven days.
The term 'spread' can refer to several different financial concepts, including the difference between buying and selling prices, the diversity in a portfolio, and a strategy in commodity futures.
Taking delivery refers to the acceptance of goods, commodities, or securities by the recipient, with documentation such as a bill of lading, reflecting the transfer and acknowledgment of receipt.
In finance, an underlying asset is the security, index, or other financial instrument that the value of a derivative is based on. Understanding the nature of the underlying asset is crucial for evaluating and managing the risk associated with derivatives.
An underlying futures contract is the specific futures contract that serves as the basis for an option on that future. For example, an option on a U.S. Treasury bond futures contract at the Chicago Board of Trade (CBOT) would have the Treasury bond futures contract as its underlying future.
