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1、9eChapter Twenty-OneCommodity and Financial Futures 2008 Cengage Learning/South-Western2Commodity and Financial Futures A formal agreement(contract)for the delivery(seller)or receipt(buyer)of a commodity Participants in futures markets are either:speculators or hedgers.3Positions Speculators buy or
2、sell contracts in anticipation of price changes.The long position anticipates price increases.The short position anticipates price decreases.4Units of Trading5Futures Contracts Contracts establish a futures price.The current(spot)price may be:lower or higherthan the futures price.6Fig.21.1 Spot and
3、Futures Prices and Open Interest for a September Contract forKansas City Wheat7Closing a Futures Contract Close a position in a futures contract by entering into the opposite position A contract to sell offsets a contract to buy.A contract to buy offsets a contract to sell.8Futures and Leverage Futu
4、res offer large profits and losses.The source of the leverage:the small margin requirement The margin requirement represents only a very small percentage of the value of the contract.9Margin Margin:a good faith deposit required of both the long position andthe short position.10Marking to the Market
5、Futures positions are marked to the market daily.Funds are transferred between accounts.Futures prices are allowed to change only by the daily limit.”11Maintenance Margin A second margin requirement:If funds in the account fall below the maintenance margin requirement,the investor receives a margin
6、call.”Failure to meet the margin call results in the position being closed.12Hedgers Buy and sell contracts to offset existing positions Growers and other users of commodities Hedge to reduce the risk of loss from price fluctuations13Hedgers Pass the risk of loss to speculators Take the opposite pos
7、itions of the speculators Forego the possibility of a large return to obtain future price certainty14The Selection of CommodityFutures ContractsTwo basic methods Technical approach averages,charts,and graphs used to identify current price movements and predict future price movements Fundamental appr
8、oach concerned with factors affecting the demand for and supply of various commodities15Non-Commodity Futures Financial futurescontracts for the future delivery of a financial asset Currency futurescontracts for the future delivery of a currency16Stock Index Futures Based on an index of stock prices
9、 Speculators buy and sell stock index futures in anticipation of changes in stock prices.Portfolio managers use stock index futures to hedge against movements in stock prices.17Exhibit 21.2 Using Stock Index Futures to Hedge$2,000,000 Portfolios18Programmed Trading Combines stock index futures and c
10、omputers ability to enter large numbers of buy and sell orders Takes advantage of small differences in stock index futures prices and prices of the underlying stock19Fig.21.2 Differential Between the Value of a Stock Index Futures Contract and the Underlying Stocks20Futures Pricing Futures prices ge
11、nerally exceed spot prices.The current futures price may reveal a consensus concerning anticipated prices in the future.21Swap Agreements A swap agreementa contract in which the two parties trade payments22Currency Swap In a currency swap,the two parties:agree to trade payments in different currenci
12、es;Swaps help manage exchange rate risk.23Other Swap Agreements In an alternative type of swap,one party trades a fixed payment for a variable payment.The“counter party”swaps the variable payment for the fixed payment.The swap helps management reduce the risk from changes in interest rates.24Equity Swap Two parties swap payments based on a stock price index.Swap payments are made based on the extent to which the price indices differ.