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In finance, a perpetual futures contract, also known as a perpetual swap, is an agreement to non-optionally buy or sell an asset at an unspecified point in the future. . Perpetual futures are cash-settled, and differ from regular futures in that they lack a pre-specified delivery date, and can thus be held indefinitely without the need to roll over contracts as they approach expi
Markets are said to be normal when futures prices are above the current spot price and far-dated futures are priced above near-dated futures. The reverse, where the price of a commodity for future delivery is lower than the expected spot price is known as backwardation. Similarly, markets are said to be inverted when futures prices are below ...
Spot–future parity (or spot-futures parity) is a parity condition whereby, if an asset can be purchased today and held until the exercise of a futures contract, the value of the future should equal the current spot price adjusted for the cost of money, dividends, "convenience yield" and any carrying costs (such as storage).
In finance, a spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for immediate settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called spot price (or spot rate).
In practice, the expected future spot price is unknown, and the term "backwardation" may refer to "positive basis", which occurs when the current spot price exceeds the price of the future. [3]: 22 The opposite market condition to normal backwardation is known as contango. Contango refers to "negative basis" where the future price is trading ...
It contrasts with a futures market, in which delivery is due at a later date. [2] In a spot market, settlement normally happens in T+2 working days, i.e., delivery of cash and commodity must be done after two working days of the trade date. [1] A spot market can be through an exchange or over-the-counter (OTC).
The intrinsic value is the difference between the underlying spot price and the strike price, to the extent that this is in favor of the option holder. For a call option, the option is in-the-money if the underlying spot price is higher than the strike price; then the intrinsic value is the underlying price minus the strike price.
A commodity swap is a type of swap agreement whereby a floating (or market or spot) price based on an underlying commodity is traded for a fixed price over a specified period. [1] The vast majority of commodity swaps involve oil. Many airline and rail companies enter oil commodity swap deals in order to secure lower oil costs in the long term.
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