http://www.premsansar.com
Futures contract is an
agreement between two parties to buy or sell a specified quantity and defined quality of a
commodity at a certain time in future at a price agreed upon at the time of
entering into the contract. This is typically traded at regulated commodity
exchanges.
1) What is a "Commodity"?
Commodity is a product having commercial value that can be produced, bought, sold and consumed. It is normally in a basic raw unprocessed state. But products derived from Primary sector and structured products are also traded at exchanges in Nepal. The list includes metals like Gold, Silver, Copper and non metals like Sugar, Coffee, Soya, Crude Oils etc.
2) What are the different types of participants
in Commodity markets?
Broadly, the participants can
be classified as Hedgers, Arbitragers and Speculators. In other words, manufacturers,
traders, farmers, exporters and investors are all participating in this
market.
http://www.premsansar.com
http://www.premsansar.com
3) How is trading done in the commodity exchanges?
Like the stock market
online trading system, commodity exchanges are also typically on the online trading system. It is an
order-driven, transparent trading platform, which is reachable to the various
participants through the Internet,
4) What is the meaning of "Futures
Contract"?
Futures contract is an
agreement between two parties to buy or sell a specified quantity and defined quality of a
commodity at a certain time in future at a price agreed upon at the time of
entering into the contract. This is typically traded at regulated commodity
exchanges.
5) What is the difference between spot market and futures market?
In a spot market
commodities are physically bought or sold usually on a negotiable basis resulting in delivery. While in
the futures markets, commodities can be bought or sold irrespective of the
physical possession of underlying commodity. The futures market trades in
standardized contractual agreements of the underlying asset with specific
quality, quantity and mode of delivery whose settlement is guaranteed by regulated commodity exchanges.
6) What is meant by Hedging?
Hedging means taking a
position in the futures or option market that is opposite to a position in the physical market. It
reduces or limits risks associated with unpredictable changes in price.. The
objective behind this mechanism is to offset a loss in one market with a gain
in another.
