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Commodity Futures Contract

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Abhijeet S
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abhishreshthaa
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Commodity Futures Contract - September 10th, 2010

Commodity Futures Contract

A commodity futures contract is a tradable standardized contract,


The futures contract is for a specified variety of a commodity, known as the "basis",


The quality parameters of the "basis" are all predetermined by the rules and regulations of the commodity exchange.


Consequently, the parties to the contract are required to negotiate only the quantity to be bought and sold, and the price.


Everything else is prescribed by the Exchange.


Because of the standardized nature of the futures contract, it can be traded with ease at a moment's notice.



The physical markets for commodities deal in either cash or spot contract for ready delivery and payment within 11 days, or forward (not futures) contracts for delivery of goods and/or payment of price after 11 days.


These contracts are essentially party to party contracts, and are fulfilled by the seller giving delivery of goods of a specified variety of a commodity as agreed to between the parties.


Rarely are these contracts for the actual or physical delivery allowed to be settled otherwise than by issuing or giving deliveries.


Such situations may arise when unforeseen and uncontrolled circumstances prevent the buyers and sellers from receiving or taking deliveries.


The contracts may then be settled mutually.

Futures markets trade in futures contracts which are primarily used for risk management (hedging) on commodity stocks or forward (physical market) purchases and sales.


Futures contracts are mostly offset before their maturity and, therefore, scarcely end in deliveries.


Speculators also use these futures contracts to benefit from changes in prices and are hardly interested in either taking or receiving deliveries of goods.
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Re: Commodity Futures Contract
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Jitendra Mazee
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jiten005
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Re: Commodity Futures Contract - February 8th, 2018

Quote:
Originally Posted by abhishreshthaa View Post
Commodity Futures Contract

A commodity futures contract is a tradable standardized contract,


The futures contract is for a specified variety of a commodity, known as the "basis",


The quality parameters of the "basis" are all predetermined by the rules and regulations of the commodity exchange.


Consequently, the parties to the contract are required to negotiate only the quantity to be bought and sold, and the price.


Everything else is prescribed by the Exchange.


Because of the standardized nature of the futures contract, it can be traded with ease at a moment's notice.



The physical markets for commodities deal in either cash or spot contract for ready delivery and payment within 11 days, or forward (not futures) contracts for delivery of goods and/or payment of price after 11 days.


These contracts are essentially party to party contracts, and are fulfilled by the seller giving delivery of goods of a specified variety of a commodity as agreed to between the parties.


Rarely are these contracts for the actual or physical delivery allowed to be settled otherwise than by issuing or giving deliveries.


Such situations may arise when unforeseen and uncontrolled circumstances prevent the buyers and sellers from receiving or taking deliveries.


The contracts may then be settled mutually.

Futures markets trade in futures contracts which are primarily used for risk management (hedging) on commodity stocks or forward (physical market) purchases and sales.


Futures contracts are mostly offset before their maturity and, therefore, scarcely end in deliveries.


Speculators also use these futures contracts to benefit from changes in prices and are hardly interested in either taking or receiving deliveries of goods.
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