Transcription of A Beginners’ Guide to Commodity Market
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A Beginners’ Guide to Commodity Market
1 A Beginners Guide to Commodity Market 3 Your Queries Our Solutions 4 Your Queries Our Solutions 1. What is a Derivative contract? A derivative contract is an enforceable agreement whose value is derived from the value of an underlying asset; the underlying asset can be a Commodity , precious metal, currency, bond, stock, or, indices of commodities, stocks etc. Four most common examples of derivative instruments are forwards, futures, and options. 2. What is a forward contract? A forward contract is a legally enforceable agreement for delivery of goods or the underlying asset on a specific date in future at a price agreed on the date of contract.
One doesn't need to have the physical commodity or own a contract for the commodity to enter into a sale contract in futures market. It is simply agreeing to sell the physical commodity at a later date or selling short. It is possible to repurchase the contract before the maturity, thereby dispensing with delivery of goods. Cash Commodity
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