What is futures contract cycle?
A contract cycle is the period for which the futures contract trades on an exchange. Stock and index futures have one-month (near month), two-month (next month) and three-month (far month) contract cycles. A new contract, which is for three months, is introduced after the expiry of the near month contract.
What is trade life cycle?
The life cycle of a trade is the fundamental activity of exchanges, investment banks, hedge funds, pension funds and many other financial companies. All the steps involved in a trade, from the point of order placed and trade execution through to settlement of the trade, are commonly referred to as the trade life cycle.
How are futures traded on exchange?
Typically, futures contracts trade on an exchange; one party agrees to buy a given quantity of securities or a commodity, and take delivery on a certain date. The selling party to the contract agrees to provide it. Investors can also trade S&P 500 futures contracts — an example of stock futures investing.
Are futures contracts traded on exchanges?
These two types of derivatives contract function in much the same way, but the main difference is that futures are exchange-traded and have standardized contract specifications. These exchanges are highly regulated and provide transparent contract and pricing data.
What are futures and options?
Futures and options are stock derivatives that are traded in the share market and are a type of contract between two parties for trading a stock or index at a specific price or level at a future date. However, the actual futures and options trade is often far more complex and fast-moving.
Who can trade exchange traded futures?
Those who are allowed access to the exchange are brokers and commercial traders who are members of the exchange. Members need to be registered with the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC).
How many stages are there in the trade life cycle?
An industry life cycle has four stages: expansion, peak, contraction, and trough.
Which is the right order of steps of a trade life cycle?
Trade lifecycle can be broadly divided into two parts: Pre-trade activities and post trade activities, Pre-trade activities consists of all those steps that take place before order gets executed, Post trade activities involve order matching, order conversion to trade and clearing & settlement activity.
What is the duration of a futures contract?
Duration: As in the case of stock futures, index futures too have three contract series open for futures trading at any point in time – the near-month (1 month), middle-month (2 months) and far-month (3 months) index futures contracts.
Are options traded on an exchange?
Options may be traded between private parties in over-the-counter (OTC) transactions, or they may be exchange-traded in live, orderly markets in the form of standardized contracts.
Which contracts are traded through exchange?
Exchange traded derivatives can be options, futures, or other financial contracts that are listed and traded on regulated exchanges such as the Chicago Mercantile Exchange (CME), International Securities Exchange (ISE), the Intercontinental Exchange (ICE), or the LIFFE exchange in London, to name just a small few.
What is the difference between futures and options contracts?
A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. An options contract gives the buyer the right to buy the asset at a fixed price. However, there is no obligation on the part of the buyer to go through with the purchase.