Forward Contract Introduction. Created by Sal Khan.
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Finance and capital markets on Khan Academy: In many commodities markets, it is very helpful for buyers or sellers to lock-in future prices. This is what both forwards and futures allow for. This tutorial explains how they work and what the difference is between the two.
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To my understanding, a futures contract is traded on a regulated exchange, while a forwards contract is usually between two private companies. Also, futures are standardized to a contract size, so they can be more easily traded.
Really? Is the farmer obligated to sell his apples even though the contract does not say he must sell it to the chain? I mean, if prices have risen then naturally he can sell it to someone else at the higher market price. Genuine doubt.
For some reasons, someone who made forward contract would not put the all quantity into the contract but just half of all quantity so the other half could be sold to other buyers with higher price if the price goes up.
+Tyler Gage pretty correct. It's simple: Futures are exchange traded - backed by a clearinghouse, while Forwards are "over-the-counter" custom contracts between two parties, not traded on an exchange. Futures are pretty much free of counterparty risk being on an exchange, while fwd contracts are not regulated.
This is just superb, I've been looking for "trade mispricing transfer pricing" for a while now, and I think this has helped. Have you ever come across - Genubrey Mispriced Infiltration - (Have a quick look on google cant remember the place now ) ? Ive heard some interesting things about it and my friend got excellent success with it.
question. so if the pie chain and farmer agree to a certain price, shouldn't that be the market price? why is there a price discrepancy between the supply and demand when they agree at a specified date? why the disequilibrium?
I've got it sorted now, averaging 400-500 pips a week easily. Finding the right trading system is key. I've tried them all, narrowed it down to one extremely powerful technique. Check out the video here --> bit.ly/LFsR1v?=ffzddp
A simple yet elegant, precise and understandable treatise on forward contracts which are the basis of futures commodity contracts and why the maligned "speculators" actually provide an extremely valuable service to producers and consumers.
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