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Futures and options are types of financial derivatives that provide the right to buy or sell other securities, such as stocks, bonds and commodities.
This setup works similarly to buying call options. 2. Go short futures. ... a trader might set up a calendar spread on oil futures by buying a February $75 contract and selling a July $75 contract.
Most commodity markets around the world trade in agricultural products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, pork bellies, oil, and metals). Trading includes various types of derivatives contracts based on these commodities, such as forwards , futures and options , as well as spot ...
A put is the option to sell a futures contract, and a call is the option to buy a futures contract. For both, the option strike price is the specified futures price at which the futures is traded if the option is exercised. Futures are often used since they are delta one instruments. Calls and options on futures may be priced similarly to those ...
An energy derivative is a derivative contract based on (derived from) an underlying energy asset, such as natural gas, crude oil, or electricity. [1] Energy derivatives are exotic derivatives and include exchange-traded contracts such as futures and options, and over-the-counter (i.e., privately negotiated) derivatives such as forwards, swaps and options.
Futures. These are a form of contract to buy or sell a specific asset, such as gold or oil, at a specific price on a future date. They can be more risky due to their future speculative nature.
[citation needed] A fuel hedge contract is a futures contract that allows a fuel-consuming company to establish a fixed or capped cost, via a commodity swap or option. The companies enter into hedging contracts to mitigate their exposure to future fuel prices that may be higher than current prices and/or to establish a known fuel cost for ...
With prices at the gas pump continuing to climb, you may be thinking it's a good time to invest in oil stocks. Before you call your broker or fire up your E-Trade account, here's what you need to...