Financial futures contract is the carrier and medium of financial futures trading. It is a standardized contract traded by all parties of financial futures trading in futures exchanges. Standardization is the most prominent feature of futures contracts. It is also the key to its smooth trading. In futures contracts, futures knowledge is very important. The quantity, grade, delivery place, delivery month and delivery method of traded commodities are standardized, and only the futures price is the only variable, which is constantly fluctuated by the public bidding of all parties in the exchange.
Generally speaking, a financial futures contract consists of the following clauses:
1. Trading unit. Financial futures trading the number of deliveries per contract is fixed, but there are different rules for different exchanges. Standardization of trading units. It greatly simplifies the process of futures trading and improves the market efficiency. To make futures trading a transaction that records only the number of futures contracts sold or bought.
2. Minimum change price. Also known as the scale or minimum amplitude, the process of formation is the smallest change in the price of a commodity or financial futures quoted in the open bid on a futures exchange. The minimum change in value multiplied by a contract trading unit. You get the minimum amount of change in the futures contract. Our criteria for the size of the minimum change in price will, in most cases, depend on factors such as the type and nature of the financial instrument, market price volatility, business practices, etc.
3. Maximum daily fluctuation range. The maximum allowable rise or fall of a futures price set by a futures exchange in a single trading day. In our country also known as the limit system. When a futures price moves beyond that limit on a single day, futures exchanges will stop trading for the day. Further trading will take place the following day. The main purpose of the daily limit is to limit risks and protect futures traders from heavy losses when futures prices rise or fall sharply.
4. Standard delivery time. Includes standard cross month and standard delivery date. Standard delivery month is the month in which futures contracts are to be settled by each exchange. Also known as the contract month. Different exchanges have different rules for the delivery month. Standard delivery date refers to the specific delivery date of the delivery month, also known as the last trading day.
5. Initial margin. Also known as the original margin. Refers to the margin deposited by both parties of futures trading to the clearing member to ensure the performance of the contract. To ensure that the losing party will be able to pay immediately if the price changes.
The health of financial futures markets is expressed in terms of prices. Price is the core and display of financial futures market. Although different types of financial futures prices differ in form. However, the basic composition of futures prices and the basic factors affecting futures prices are the same.
In real futures trading, carrying costs must be taken into account, so the basis will not be zero.
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