Index futures are financial contracts that allow traders to bet on the direction of a particular stock market index. Indexes are baskets of stocks that trade together and are used to measure the performance of a particular segment of the market. The most popular index futures are based on the S&P 500 and the Dow … Read more
The implied rate is the interest rate that is implied by the price of a financial instrument. For example, if the price of a bond is $100, the implied rate is the interest rate that would make the price of the bond equal to $100. The implied rate can be different from the actual interest … Read more
A Futures Commission Merchant (FCM) is a broker that is registered with the Commodity Futures Trading Commission (CFTC). FCMs must also be members of the National Futures Association (NFA). An FCM is a broker that executes orders and trades for customers in the futures markets. FCMs must be registered with the CFTC and must also … Read more
The variation margin is the amount of money that a futures contract holder must put up or deposit to cover losses due to price changes. It is also called the mark-to-market margin. The variation margin is not the same as the initial margin, which is the amount of money needed to enter into a futures … Read more
Bond futures are a type of derivative contract that allows investors to speculate on the future price of a bond. The contract is an agreement to buy or sell a bond at a certain price on a certain date. Bond futures are traded on exchanges and can be used to hedge against changes in the … Read more
The convenience yield is the difference between the actual yield of a security and the theoretical yield. The actual yield is the return that an investor receives from holding the security, while the theoretical yield is the return that an investor would receive if the security was held in a perfect market. The convenience yield … Read more
Cash-and-carry arbitrage is a trading strategy that involves simultaneously buying an asset and selling a future contract on that asset. The trade is typically entered into when the asset’s price is low and the futures contract’s price is high, in the hope that the asset’s price will increase before the futures contract expires, allowing the … Read more
