This video introduces futures contracts and some key terminology such as performance bonds, mark-to-market and works through a quick example of leverage
Can anyone help? 1. A UK based exporter is due to receive US$5 million in 3 months time. Write a report for the exporter covering the following: I need to calculate the sterling received if you used forwards, futures and options to convert it from dollars.
Not necessarily. The futures price goes up/down as markets are open. At the end of each trading day, the contract is "marked to market". So, for example, if I put up an initial margin of $2000 and the contract increased in value by $300 before I sold it, I would make a $300 profit. If it decreased in value by $500, I would have a loss of $500. In the second example, I would have fallen below the maintenance margin, so would need to add back $500 or the position would be closed.
