Futures and options contracts allow parties to agree on delivery and pricing of an asset in the future. Futures contracts create obligations to buy or sell, while options create rights but not obligations. These markets exist to allow for risk transfer between parties and help discover asset prices. Trading involves gains or losses from price changes, uses leverage, and requires considering one's account and trading style.
Mergers and acquisitions can be stressful. This is especially the case when attempting a cross-border transaction (e.g., UK-Japan deals) where you fear that the business/transaction common sense that you have obtained over the years may not be applicable. In this article, Saburo Nakao and Manmohan Singh Panesar of the Squire Sanders Hammonds Euro-Japan Group discuss a few highlights of M&A transactions that will hopefully increase your comfort level with deals in the UK.
Frank Roessler on 3 Ideas to Maximize Profits at Your Multi-Family PropertyFrank Roessler
Multi-family properties is a lucrative aspect of real estate, but the key to profitability is innovative and strategic thinking. Frank Roessler provides 3 ideas to help you reach your profit goals.
The document discusses strategies for companies to take advantage of changing stock and bond market conditions, including:
1) Issuing stocks and bonds at opportune times through "double barreled" non-simultaneous issues.
2) Refinancing bond issues at more favorable interest rates.
3) Using convertible bonds, convertible debentures, and callable stocks and bonds to hedge against market moves.
4) Protecting company value by preventing short selling through private placements.
The priceless lesson investors in black berry receiveddailyletter
This document discusses the risks of leveraging investments to increase returns. It describes how leverage can magnify both gains and losses, using the example of someone who borrowed money to invest in BlackBerry stock. When the stock price plunged after a loss was reported, the leveraged investor lost their entire $1,000 investment plus an additional $800 due to borrowing and leverage. The document warns that while leverage can boost returns, it also increases risk and losses, so proper risk management through stops and limits is necessary when using leverage to avoid potentially large losses.
Unless you can predict the future, investing is a risky business. Know your goals, your needs and your tolerance for risk before you put your money at stake.
Prudential is a leading international financial services group established in 1848 with a presence in Europe, Asia, and the US. It has a very strong financial position with a AA credit rating from Standard & Poor's. Prudential's Portfolio Management Group manages over £127 billion in assets with an excellent long-term track record in global multi-asset investing.
Mergers and acquisitions can be stressful. This is especially the case when attempting a cross-border transaction (e.g., UK-Japan deals) where you fear that the business/transaction common sense that you have obtained over the years may not be applicable. In this article, Saburo Nakao and Manmohan Singh Panesar of the Squire Sanders Hammonds Euro-Japan Group discuss a few highlights of M&A transactions that will hopefully increase your comfort level with deals in the UK.
Frank Roessler on 3 Ideas to Maximize Profits at Your Multi-Family PropertyFrank Roessler
Multi-family properties is a lucrative aspect of real estate, but the key to profitability is innovative and strategic thinking. Frank Roessler provides 3 ideas to help you reach your profit goals.
The document discusses strategies for companies to take advantage of changing stock and bond market conditions, including:
1) Issuing stocks and bonds at opportune times through "double barreled" non-simultaneous issues.
2) Refinancing bond issues at more favorable interest rates.
3) Using convertible bonds, convertible debentures, and callable stocks and bonds to hedge against market moves.
4) Protecting company value by preventing short selling through private placements.
The priceless lesson investors in black berry receiveddailyletter
This document discusses the risks of leveraging investments to increase returns. It describes how leverage can magnify both gains and losses, using the example of someone who borrowed money to invest in BlackBerry stock. When the stock price plunged after a loss was reported, the leveraged investor lost their entire $1,000 investment plus an additional $800 due to borrowing and leverage. The document warns that while leverage can boost returns, it also increases risk and losses, so proper risk management through stops and limits is necessary when using leverage to avoid potentially large losses.
Unless you can predict the future, investing is a risky business. Know your goals, your needs and your tolerance for risk before you put your money at stake.
Prudential is a leading international financial services group established in 1848 with a presence in Europe, Asia, and the US. It has a very strong financial position with a AA credit rating from Standard & Poor's. Prudential's Portfolio Management Group manages over £127 billion in assets with an excellent long-term track record in global multi-asset investing.
The document provides instructions for fitting, maintaining, and adjusting settings for the BOS Stoy downhill shock. It describes the included mount kits for fitting the shock to different bike frames. Base settings for spring preload and damping adjustments are outlined to achieve the recommended 30-40% sag. The shock has low-speed compression, high-speed compression, and rebound adjustments, and the document provides guidance on their effects and how to tune them for different riding conditions and terrain. Maintenance instructions are also included.
Este documento presenta una secuencia didáctica interdisciplinar sobre el cuerpo humano para alumnos de 2o de primaria. La secuencia involucra las áreas de ciencias naturales, educación física, inglés y educación artística. El objetivo es que los estudiantes creen un póster del cuerpo humano mostrando las diferentes partes en español e inglés. La secuencia consta de varias sesiones en las que los alumnos aprenderán sobre el cuerpo, practicarán ejercicios físicos y trabajarán en grup
El documento presenta una secuencia didáctica sobre el cuerpo humano para alumnos de 2o de primaria. La secuencia se desarrollará a través de varias sesiones y áreas como ciencias naturales, educación física, inglés y plástica. El producto final será un póster grupal con la silueta del cuerpo humano y las partes en castellano e inglés. Los alumnos trabajarán de forma individual, en pequeños grupos y grupal, asumiendo diferentes roles para completar el póster.
An easy way to find the new Companies Act, 2013 with its new and important changes..
Tried to made it maximum simple to understand..
The new legislation will create new avenues for Business and Professionals relating to this field..especially corporate law experts..
Dokumen ini berkisar tentang pelajaran bahasa Melayu di Sekolah Kebangsaan Taman Indah untuk Tahun 3. Ia menyenaraikan langkah-langkah pembelajaran tentang mengenal pasti perkara penting dalam gambar dan menceritakan gambar dengan ayat yang betul. Terdapat juga latihan mengenal pasti buah dan membina perkataan berdasarkan gambar.
Las verduras y hortalizas son parte importante de una dieta saludable. Contienen vitaminas, minerales y fibra que ayudan a mantener un peso saludable y reducen el riesgo de enfermedades crónicas. Se recomienda comer verduras y hortalizas de diferentes colores todos los días para obtener una variedad de nutrientes.
The document provides an overview of the stock market in India, including key stock exchanges and indices, how transactions work, factors that influence stock prices, and different types of trading. It discusses fundamental analysis and technical analysis for selecting stocks, as well as concepts like hedging, speculation, arbitrage, and attributes of successful investors. The summary highlights the main Indian stock exchanges, how indices are calculated, the transaction process, and different trading strategies covered in the document.
This document provides an overview of stocks and the stock market. It discusses what owning stock means, the two major stock exchanges (NYSE and NASDAQ), how stock prices are determined, and factors that can affect stock prices. Key points include: when you buy stock you become a shareholder and own a piece of the company; the NYSE uses physical trading floors while NASDAQ uses an electronic network; stock prices fluctuate based on supply and demand from investors; and a company's performance as well as broader economic conditions can impact its stock price.
This simple presention is shared with NO sales agenda. It is written and shared to help you learn whether or not you have an interest in the foreign currency market.
BankofShares
We are an independent Investment Banking Advisory Firm for global midmarket transaction based in Estonia with international presence.
BankofShares is a team of experienced, certified investment advisors who represent businesses of all sizes and types. We promote International Investments in a confidential environment and manage negotiations until a deal is agreed on and closing legalities are finalized, while keeping your interests in the forefront whether representing you as a buyer or a seller.
Jimmy Gentry presents "Understanding Markets" during the annual 2012 Reynolds Business Journalism Seminars, hosted by the Donald W. Reynolds National Center for Business Journalism. For more information about free training for business journalists, please visit businessjoutnalism.org.
The document provides an overview of investing in stocks and the stock market. It discusses what owning stock means, the major US stock exchanges (NYSE and NASDAQ), how stock prices are determined on each exchange, factors that can affect stock prices, and how to read a stock quote. The purpose is to educate about basic concepts for someone starting to invest in the stock market.
The document provides an introduction to stock markets and investing. It discusses key concepts such as stocks, bonds, indexes, market orders, short selling, and margin trading. It also outlines different market sectors including defensive sectors like utilities and cyclical sectors that are more sensitive to economic changes. Finally, it introduces the LHA Stock Market Game, where students will each receive $100,000 to invest and trade stocks against their classmates.
The document provides instructions for fitting, maintaining, and adjusting settings for the BOS Stoy downhill shock. It describes the included mount kits for fitting the shock to different bike frames. Base settings for spring preload and damping adjustments are outlined to achieve the recommended 30-40% sag. The shock has low-speed compression, high-speed compression, and rebound adjustments, and the document provides guidance on their effects and how to tune them for different riding conditions and terrain. Maintenance instructions are also included.
Este documento presenta una secuencia didáctica interdisciplinar sobre el cuerpo humano para alumnos de 2o de primaria. La secuencia involucra las áreas de ciencias naturales, educación física, inglés y educación artística. El objetivo es que los estudiantes creen un póster del cuerpo humano mostrando las diferentes partes en español e inglés. La secuencia consta de varias sesiones en las que los alumnos aprenderán sobre el cuerpo, practicarán ejercicios físicos y trabajarán en grup
El documento presenta una secuencia didáctica sobre el cuerpo humano para alumnos de 2o de primaria. La secuencia se desarrollará a través de varias sesiones y áreas como ciencias naturales, educación física, inglés y plástica. El producto final será un póster grupal con la silueta del cuerpo humano y las partes en castellano e inglés. Los alumnos trabajarán de forma individual, en pequeños grupos y grupal, asumiendo diferentes roles para completar el póster.
An easy way to find the new Companies Act, 2013 with its new and important changes..
Tried to made it maximum simple to understand..
The new legislation will create new avenues for Business and Professionals relating to this field..especially corporate law experts..
Dokumen ini berkisar tentang pelajaran bahasa Melayu di Sekolah Kebangsaan Taman Indah untuk Tahun 3. Ia menyenaraikan langkah-langkah pembelajaran tentang mengenal pasti perkara penting dalam gambar dan menceritakan gambar dengan ayat yang betul. Terdapat juga latihan mengenal pasti buah dan membina perkataan berdasarkan gambar.
Las verduras y hortalizas son parte importante de una dieta saludable. Contienen vitaminas, minerales y fibra que ayudan a mantener un peso saludable y reducen el riesgo de enfermedades crónicas. Se recomienda comer verduras y hortalizas de diferentes colores todos los días para obtener una variedad de nutrientes.
The document provides an overview of the stock market in India, including key stock exchanges and indices, how transactions work, factors that influence stock prices, and different types of trading. It discusses fundamental analysis and technical analysis for selecting stocks, as well as concepts like hedging, speculation, arbitrage, and attributes of successful investors. The summary highlights the main Indian stock exchanges, how indices are calculated, the transaction process, and different trading strategies covered in the document.
This document provides an overview of stocks and the stock market. It discusses what owning stock means, the two major stock exchanges (NYSE and NASDAQ), how stock prices are determined, and factors that can affect stock prices. Key points include: when you buy stock you become a shareholder and own a piece of the company; the NYSE uses physical trading floors while NASDAQ uses an electronic network; stock prices fluctuate based on supply and demand from investors; and a company's performance as well as broader economic conditions can impact its stock price.
This simple presention is shared with NO sales agenda. It is written and shared to help you learn whether or not you have an interest in the foreign currency market.
BankofShares
We are an independent Investment Banking Advisory Firm for global midmarket transaction based in Estonia with international presence.
BankofShares is a team of experienced, certified investment advisors who represent businesses of all sizes and types. We promote International Investments in a confidential environment and manage negotiations until a deal is agreed on and closing legalities are finalized, while keeping your interests in the forefront whether representing you as a buyer or a seller.
Jimmy Gentry presents "Understanding Markets" during the annual 2012 Reynolds Business Journalism Seminars, hosted by the Donald W. Reynolds National Center for Business Journalism. For more information about free training for business journalists, please visit businessjoutnalism.org.
The document provides an overview of investing in stocks and the stock market. It discusses what owning stock means, the major US stock exchanges (NYSE and NASDAQ), how stock prices are determined on each exchange, factors that can affect stock prices, and how to read a stock quote. The purpose is to educate about basic concepts for someone starting to invest in the stock market.
The document provides an introduction to stock markets and investing. It discusses key concepts such as stocks, bonds, indexes, market orders, short selling, and margin trading. It also outlines different market sectors including defensive sectors like utilities and cyclical sectors that are more sensitive to economic changes. Finally, it introduces the LHA Stock Market Game, where students will each receive $100,000 to invest and trade stocks against their classmates.
Jimmy Gentry on 'Understanding Markets" at Reynolds Business Journalism Week, Feb. 4-7, 2011.
Reynolds Center for Business Journalism, BusinessJournalism.org, Arizona State University's Walter Cronkite School of Journalism.
This document provides an overview of the Quantum Securities trading platform and services offered by Markets and YOU (MAY). It summarizes MAY as an award-winning trading platform and signal provider that allows clients to profit from global stock market fluctuations. Binary or index trading through MAY's platform offers a simple and low-risk way to generate consistent profits through 1-hour trades predicted by MAY's analysts, with profits potentially realized on both rising and falling markets. Recent trading results from April to September 2015 using MAY's signals on a $5,000 account showed over 800% growth and $43,653 in profits.
This document provides information about an upcoming event hosted by Vancouver Disciplined Trading Hub (VDTH). It includes details about meetup locations and times in Vancouver and Surrey. The presentation will cover who the presenters are, what disciplined trading means, inspiration sources, non-directional and directional trade strategies, and content for the upcoming week. Disclaimers are provided that the presenters are not registered advisors and are not providing personalized recommendations.
The RE Investment News is the monthly newsletter for Mid-America Association of Real Estate Investors. This month: Cap Rate, IRA / 401 K Case Law, Real Estate Marketing and as always our calendar and business directory.
The document provides an introduction to forex trading, including:
- Forex is the largest financial market allowing 24/5 trading of currency pairs.
- Currency pairs involve buying or selling one currency for another at an exchange rate.
- Traders can go "long" to profit from an appreciating currency or go "short" to profit from a depreciating one.
- Risk management tools like stop losses and position sizing are important for success.
- Forex offers benefits like leverage, low costs, and opportunities to trade in any market direction.
The document discusses futures contracts for indexes like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite. It explains that futures contracts allow people to bet on the future price of these indexes. The document also discusses how futures prices before market open can indicate whether the indexes are expected to be up or down at open based on orders placed overnight. Various questions and answers provide more details on how futures are priced, where to find futures quotes and charts, and the differences between futures and the underlying indexes.
This document defines stock market terms from A to B. It provides definitions for terms like advanced companies, agent, Alberta Securities Commission, all-or-none order, American-style options, annual report, anonymous trading, arbitrage, ask or offer, assets, assignment, at-the-money, averages and indices, and averaging down.
This document provides an introduction to options strategies. It discusses that planning, commitment, and research are needed before investing in options. The document outlines that investors must understand how they want options to work in their portfolio and choose a strategy that helps meet their investment goals. It then provides an overview of some simple and more complex options strategies, noting that simple strategies are best for beginners. The document emphasizes the importance of avoiding common mistakes like overleveraging, lack of understanding, and not doing research. It concludes by stressing the importance of committing to a chosen strategy.
This document provides information about Confluence Investment Advisors, a fee-only advisory firm that constructs low-cost ETF portfolios for individual investors. Key points:
- Confluence charges significantly lower fees than a typical advisor, saving clients thousands per year.
- The firm's founder, Paul Fraker, has decades of experience in finance and investment management.
- Confluence takes a passive approach, constructing globally diversified ETF portfolios tailored to each client's goals, risk tolerance, and tax situation. ETFs provide broad exposure at very low costs.
- By using low-fee ETFs and charging only for portfolio management, Confluence aims to maximize investors' returns over time
Futures contracts allow investors to speculate on or hedge against the future price of an asset. Index futures specifically track the price of a stock market index. The Nasdaq, S&P 500, and Dow Jones Industrial Average all have futures contracts that trade after the regular stock market closes and provide indications of where those indexes may open the next day. These futures prices are determined by orders to buy and sell index components that are placed when the market is closed but will be executed at the next opening.
The document discusses futures contracts for indexes like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite. It explains that futures contracts allow people to bet on the future price of these indexes. Each day, the futures prices provide an indication of whether the indexes are expected to open higher or lower based on orders placed overnight. The document also answers questions about where to find futures price quotes and charts, how futures contracts work, and the difference between futures and the underlying indexes.
The document discusses futures contracts for indexes like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite. It explains that futures prices are set based on orders placed when the market is closed to buy or sell stocks the next day. If there are more sell orders, futures prices will be down, and if there are more buy orders, futures prices will be up. It also discusses how futures prices reported in the morning give an indication of how the indexes may open that day.
The Evolution and Impact of OTT Platforms: A Deep Dive into the Future of Ent...ABHILASH DUTTA
This presentation provides a thorough examination of Over-the-Top (OTT) platforms, focusing on their development and substantial influence on the entertainment industry, with a particular emphasis on the Indian market.We begin with an introduction to OTT platforms, defining them as streaming services that deliver content directly over the internet, bypassing traditional broadcast channels. These platforms offer a variety of content, including movies, TV shows, and original productions, allowing users to access content on-demand across multiple devices.The historical context covers the early days of streaming, starting with Netflix's inception in 1997 as a DVD rental service and its transition to streaming in 2007. The presentation also highlights India's television journey, from the launch of Doordarshan in 1959 to the introduction of Direct-to-Home (DTH) satellite television in 2000, which expanded viewing choices and set the stage for the rise of OTT platforms like Big Flix, Ditto TV, Sony LIV, Hotstar, and Netflix. The business models of OTT platforms are explored in detail. Subscription Video on Demand (SVOD) models, exemplified by Netflix and Amazon Prime Video, offer unlimited content access for a monthly fee. Transactional Video on Demand (TVOD) models, like iTunes and Sky Box Office, allow users to pay for individual pieces of content. Advertising-Based Video on Demand (AVOD) models, such as YouTube and Facebook Watch, provide free content supported by advertisements. Hybrid models combine elements of SVOD and AVOD, offering flexibility to cater to diverse audience preferences.
Content acquisition strategies are also discussed, highlighting the dual approach of purchasing broadcasting rights for existing films and TV shows and investing in original content production. This section underscores the importance of a robust content library in attracting and retaining subscribers.The presentation addresses the challenges faced by OTT platforms, including the unpredictability of content acquisition and audience preferences. It emphasizes the difficulty of balancing content investment with returns in a competitive market, the high costs associated with marketing, and the need for continuous innovation and adaptation to stay relevant.
The impact of OTT platforms on the Bollywood film industry is significant. The competition for viewers has led to a decrease in cinema ticket sales, affecting the revenue of Bollywood films that traditionally rely on theatrical releases. Additionally, OTT platforms now pay less for film rights due to the uncertain success of films in cinemas.
Looking ahead, the future of OTT in India appears promising. The market is expected to grow by 20% annually, reaching a value of ₹1200 billion by the end of the decade. The increasing availability of affordable smartphones and internet access will drive this growth, making OTT platforms a primary source of entertainment for many viewers.
Understanding User Needs and Satisfying ThemAggregage
https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
In this webinar, we won't focus on the research methods for discovering user-needs. We will focus on synthesis of the needs we discover, communication and alignment tools, and how we operationalize addressing those needs.
Industry expert Scott Sehlhorst will:
• Introduce a taxonomy for user goals with real world examples
• Present the Onion Diagram, a tool for contextualizing task-level goals
• Illustrate how customer journey maps capture activity-level and task-level goals
• Demonstrate the best approach to selection and prioritization of user-goals to address
• Highlight the crucial benchmarks, observable changes, in ensuring fulfillment of customer needs
The 10 Most Influential Leaders Guiding Corporate Evolution, 2024.pdfthesiliconleaders
In the recent edition, The 10 Most Influential Leaders Guiding Corporate Evolution, 2024, The Silicon Leaders magazine gladly features Dejan Štancer, President of the Global Chamber of Business Leaders (GCBL), along with other leaders.
Navigating the world of forex trading can be challenging, especially for beginners. To help you make an informed decision, we have comprehensively compared the best forex brokers in India for 2024. This article, reviewed by Top Forex Brokers Review, will cover featured award winners, the best forex brokers, featured offers, the best copy trading platforms, the best forex brokers for beginners, the best MetaTrader brokers, and recently updated reviews. We will focus on FP Markets, Black Bull, EightCap, IC Markets, and Octa.
Storytelling is an incredibly valuable tool to share data and information. To get the most impact from stories there are a number of key ingredients. These are based on science and human nature. Using these elements in a story you can deliver information impactfully, ensure action and drive change.
Industrial Tech SW: Category Renewal and CreationChristian Dahlen
Every industrial revolution has created a new set of categories and a new set of players.
Multiple new technologies have emerged, but Samsara and C3.ai are only two companies which have gone public so far.
Manufacturing startups constitute the largest pipeline share of unicorns and IPO candidates in the SF Bay Area, and software startups dominate in Germany.
Company Valuation webinar series - Tuesday, 4 June 2024FelixPerez547899
This session provided an update as to the latest valuation data in the UK and then delved into a discussion on the upcoming election and the impacts on valuation. We finished, as always with a Q&A
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
At Techbox Square, in Singapore, we're not just creative web designers and developers, we're the driving force behind your brand identity. Contact us today.
Part 2 Deep Dive: Navigating the 2024 Slowdownjeffkluth1
Introduction
The global retail industry has weathered numerous storms, with the financial crisis of 2008 serving as a poignant reminder of the sector's resilience and adaptability. However, as we navigate the complex landscape of 2024, retailers face a unique set of challenges that demand innovative strategies and a fundamental shift in mindset. This white paper contrasts the impact of the 2008 recession on the retail sector with the current headwinds retailers are grappling with, while offering a comprehensive roadmap for success in this new paradigm.
Authentically Social by Corey Perlman - EO Puerto Rico
Basics
1. THE BASICS on Futures & Options Kansas City Board of Trade
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11. THE BASICS on Futures & Options Ideas for portions of this presentation came from “Understanding Opportunities and Risks in Futures Trading,” a publication of the National Futures Association. To order that publication or other NFA materials, please call the NFA’s Information Center toll-free at 1-800-621-3570. This presentation is in no way intended to provide a complete futures education. Sources for additional information include the NFA, the exchanges where various products are traded, and your broker or advisor. Value Line is a registered mark of Value Line, Inc., a New York corporation that provides financial services and publications. Since 1982, the Kansas City Board of Trade has been licensed to use the Value Line mark in connection with its efforts to establish futures markets tied to the Value Line index. The Kansas City Board of Trade and Value Line, Inc. are not affiliated corporate entities.
Editor's Notes
CURIOUS ABOUT FUTURES AND OPTIONS? This presentation was designed for you. It was not made to tell you whether or not to trade, or in which markets or in what ways. It was made to give you some basic insight into how futures and options markets work. It also was designed by the Kansas City Board of Trade, an exchange that offers trading in futures and options markets. Yet you can rest assured that in this presentation we're not trying to sell you on trading our markets. As we'll discuss further, futures and options trading is not for everyone. But for some investors, futures and options markets can provide the opportunity to diversify and to increase returns. And for all investors, being better informed about how futures and options markets work is an important part of a well-rounded financial education. Futures and options markets play a vital role in today's economy, and provide a valuable service both to industry and to individuals. So continue. We hope you'll enjoy the benefits.
A futures contract is just what it's called – a contract. It is not equity in a stock or commodity. It is a contract – a contract to make or take delivery of a product in the future, at a price set in the present. In formalized trading of futures contracts on exchanges, standardized agreements specify price, quantity and the month of delivery. Futures markets have their roots in agriculture, but today futures and options on futures are traded on a wide range of products from wheat to natural gas to stock indexes, precious metals and currencies. Options on futures can be thought of like insurance. An option buyer (the insured) pays a premium to an option seller (the insurance company) for the right to buy or sell a futures contract at a specific price. However, just like with insurance, the option buyer may or may not exercise his right (use his insurance).
If you agree in April with your Aunt Sue that you will buy two pounds of tomatoes from her garden for $5, to be delivered to you when they're ripe in July, you and Sue just entered into a futures contract.
Professionals such as grain merchants, energy firms and portfolio managers use futures and options to reduce the risk to their business associated with volatile prices. For example, a flour miller might use a futures contract to set a price now for wheat that he knows he will need to purchase in the future, rather than face the chance that prices could be even higher when he buys the wheat. Similarly, a natural gas producer might use a futures contract to set a price now for gas he will sell in the future, locking in a profit rather than being exposed to the possibility of lower prices. These types of futures and options users are known as hedgers, and are in the market specifically to reduce risk. People who assume risk take it on in exchange for the opportunity for profit. Thus the futures and options markets serve the important function of risk transfer. Futures and options markets also provide the economy with price discovery. Futures prices are determined by supply and demand. An exchange itself does not set prices; it simply provides a place where buyers and sellers can negotiate. If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. The prices discovered through futures markets offer valuable economic information about supply and demand in a competitive business environment.
An added economic benefit of using futures and options markets for many investors is lowered transaction costs. For example, someone interested in investing in stocks can in one transaction purchase a Kansas City Board of Trade Value Line stock index futures contract representing 1650 stocks, rather than buying and paying a commission on each stock separately in 1650 different transactions. Similar to stocks, gains and losses in futures trading are the result of price changes. If you have sold a futures contract, your trade will show a profit if prices fall. If you have bought, higher prices will produce a profit. To make a profit on a futures trade you can first buy low and then sell high, or reverse the order and sell high, then buy low.
It is important to understand futures may be highly leveraged. This means that if the price moves in the direction you anticipated you could realize large profits in relation to your initial investment. Conversely, if prices move in the opposite direction of what you anticipated, you could realize large losses in relation to your initial investment. Options on futures are different from futures themselves in that the most a buyer can lose is the cost of purchasing the option, known as the premium, along with transaction costs. An option seller, however, has unlimited risk. Think of the insurance example we used earlier. The option buyer is like the insured and is paying only the insurance premium for his protection. The option seller is like the insurance company and is taking on unlimited risk in hopes that he can collect the premium and the insurance will not be used.
Should an investor decide to participate in futures or options trading, just as with stocks, there are a number of factors to consider. Similar to trading stocks, in futures you can trade your own account – with or without the recommendations of a brokerage firm. Another alternative is an account that is still your individual account, but you give someone else written power of attorney to make and execute trading decisions on your behalf. You can also choose to use an individual or firm that for a fee provides advice on commodity trading. Yet another choice is to participate in a commodity pool, similar in concept to a stock mutual fund. Your money is combined with other participants and traded as a single account, and you share in profits or losses in the pool. Just as with trading stocks, before you can start trading futures you'll need a registered broker. This may or may not be a person who also trades stocks, but it must be a person who is licensed to trade futures. Just as with any other financial endeavor, we urge you to feel comfortable with all aspects of your relationship with a potential broker before entering into a business arrangement. Before you select a broker, we encourage you to call the National Futures Association at 800-676-4632 to check on whether any disciplinary action has been taken against the broker by the NFA, the Commodity Futures Trading Commission or an exchange. Again, as with trading stocks, when you apply with a broker to open an account, you can expect to be asked to provide information on topics such as your income, net worth and investment experience. At a minimum, the person or firm that handles your account is required to provide you with risk disclosure documents or statements specified by the Commodity Futures Trading Commission and obtain written acknowledgement that you have received and understood them.
To better understand the process an individual interested in trading futures might go through, let's use our friend, K.C. Isgreat, for a simplified, hypothetical trading example. Let's assume K.C. has already done his homework, as any wise investor does before making an investment, and he has decided that futures would fit nicely into his portfolio. He has also chosen to make trading decisions for himself, and has elected to trade Kansas City Board of Trade Value Line stock index futures. What does K.C. do next? 1) Choose a broker. A futures broker, that is. This person may or may not also be a stock broker. 2) Enter into an agreement with the broker and set up an account. To trade futures, you must deposit what is known as initial margin. Initial margin is the amount of money a customer must deposit for each futures contract to be traded. Exchanges set minimum margin requirements, while individual brokerage firms may require higher margin deposits from their customers. Note that in futures markets, margin has a different meaning and purpose than it does in stocks. In futures, margin money is earnest money made solely as a deposit of good faith. A trader's brokerage firm can draw upon the money to cover losses that may be incurred in the course of futures trading. Once margin is deposited and a futures contract is bought or sold, profits on the open futures position will be added to the margin account, and losses will be deducted from the margin account. If and when funds in a margin account are reduced by losses to below a level known as the maintenance margin, a broker will require that additional funds be deposited to the account to bring it back to the level of the initial margin. This is known as a margin call. Before trading, it is important to understand a brokerage firm's margin agreement and how and when the firm expects margin calls to be met.
3) Make your first trade. In this instance, K.C. has decided to hedge. He has a substantial, diversified portfolio in the stock market, but he is concerned that the U.S. economy could be headed into a recession and that the stock market may be headed downward in the near term. He doesn't want to sell his stocks because of the time and expense in commissions and later possibly rebuilding the portfolio, but he does want to protect himself against potential near-term losses. Through futures, K.C. can protect himself against the near-term losses without liquidating his stock portfolio, with one transaction and one brokerage commission.
K.C. calls his broker and places an order to sell one KCBT nearby Value Line futures contract at the market. The order is filled at a stock index level of 950.00 points, representing $95,000. The U.S. economy does indeed take a downturn, and the stock market falls. K.C.'s stock portfolio suffers losses. However, when K.C. decides to buy back his Value Line contract, the index is trading at 939.00. Since each index point in KCBT Value Line futures is worth $100, K.C.'s trade, in which he sold at 950.00 and bought at 939.00 (a difference of 11.00 points) shows a profit of $1,100 ($100 times 11.00), minus his broker's commission. This profit offsets losses in his stock portfolio. If the stock market had risen when K.C. decided to buy back his contract, let's say to 959.00, his futures trade would have showed a loss of $900 (950.00 –959.00 is –9.00, and 9.00 times $100 is $900). However, properly hedged, gains in his stock portfolio offset the futures losses.
As we stated at the outset, futures and options trading is not for everyone. But it does provide opportunities for some investors to diversify and enhance their rate of return in exchange for taking on certain risks. And for all of us, whether we are involved directly in the markets or not, futures and options serve important functions of risk transfer and price discovery that benefit our economy. At the Kansas City Board of Trade we're proud of our industry, and we hope you've enjoyed hearing some of our story.