Trading futures and options for dummies - Derivative Markets Explained Workshop – SAIFM
May Introduction of fully automated trading through a specifically designed system that was written in South Africa.
January Safex Agricultural Derivatives Division opened. December Volumes exceed 1 million per month for the first time. Open interest is overcontracts.
January Monthly volumes exceedOpen interest ffuturescontracts. October Options-on-futures launched together with a world- class, portfolio-scanning- type margining system.
June Monthly volumes start consistently exceedingcontracts.
August Enabling legislation the Financial Markets Control Act, is enacted and Safex is officially licensed as a derivatives exchange. Officially opened stock options multiplier 10 August by the Minister of Finance.
Monthly volumes are approximately 60, contracts, with 10, open interest.
April Safcom takes over operation of the informal futures market from RMB. Futures contracts are available on equity indices, long bonds and money market products.
RMB is the exchange, clearing house and only market maker. You can help Wikipedia by expanding it. Retrieved from " https: Views Read Edit View history.
Naturally, they could factor such certainties like the spot price of the commodity and the cost of money for the period into the equation but they still had to reckon with market vagaries which might blow their prices out of the water.
As all deal were one-on-one, there was also the strong possibility that the counterparty might suffer from dealers' amnesia if the price went against trading futures and options for dummies.
All this made it quite natural for the forward trader to go fjtures way of the dinosaur and for clients to move towards the futures markets to hedge their forward risk.
The existence of an exchange standing between all parties makes the futures transaction far preferable to the counter-party risk problems entailed in the forward market.
Then there is the size of the contract. Forward deals have to be agreed by both parties when it comes to specifying amounts - in futures you can buy as many or as few of the standardised contracts in a variety of commodities and financial instruments.
In forwards the chances of a counter-party wanting to sell precisely the amount that you want to buy are slim. Parties to forward contracts normally intend to make dummiies take delivery of the underlying asset.
In futures this rarely happens, but this does not mean it cannot happen. If you really want a lorry load of live hogs delivered to your front yard then just don't close out your commodity futures contract for cash settlement!
However, this "non-deliverable" aspect makes futures a superior product to forwards. The fact that a cash settlement can attract a speculator into a market that would not normally interest him simply because of the whiff of profit, means that the client who, a now has an army of investors who think they know more about oil than he does and are willing to put their money into trading futures and options for dummies futures market to prove it, thereby providing the hedger volume indicator trading system an efficient pricing mechanism.
In SA, the most familiar forward contract to the corporate sector is probably the currency forward.
Through dummied bank - as only licensed bank are allowed to deal in foreign exchange - an importer or exporter is able to lock in to an exchange rate to minimise any losses from a fall in the rand.
There are no exchange traded currency futures in SA as yet forexbug SA's exchange control regulations forbid it.
Both forwards and futures have their place in financial markets, and aside from currencies, they are used for dealing in commodities and fixed-interest securities. In addition, futures are traded on notional assets.
In essence, a futures contract resembles a traing contract, but is standardised and this makes it accessible to a wider market. Though both futures and forwards are by banks, financial institutions and brokers, there is no public participation in forwards, which is a tool of the professional markets.
Both futures and forwards are deals done now for the settlement at some future date. A future differs from a forward in that the future is a standardised contract for a particular date, quantity and quality, traded on a formal exchange.
Credit or counter-party risk is removed in that the futures participants look to the exchange, rather than to one another, to guarantee performance.
This, together with the standardisation of the contract, allows foor users to adjust their view of the market and unwind positions without having to find the original counter-parties.
The timing of the cash flows points up major differences between the two:
Description:Feb 24, - There are also options on futures, swaps, and even on other options, 4 In South Africa, the traded volumes of some derivatives contracts.