Howard O'Connor
Active Member
Hi all
Just a query about futures:
In CT1-11 page 24 fourth paragraph the notes read, “For example, if you agree to buy a future and then the price of the underlying asset, and hence the future, goes down…” Why does it refer to someone who agrees to buy a future and not simply to someone who actually buys a future and then the future’s price goes down? What mechanism is there for agreeing to buy a future in a way that is legally binding? Is this an example of a derivative of a derivative – as the investor is speculating on the future price of a future?
Thank you
Just a query about futures:
In CT1-11 page 24 fourth paragraph the notes read, “For example, if you agree to buy a future and then the price of the underlying asset, and hence the future, goes down…” Why does it refer to someone who agrees to buy a future and not simply to someone who actually buys a future and then the future’s price goes down? What mechanism is there for agreeing to buy a future in a way that is legally binding? Is this an example of a derivative of a derivative – as the investor is speculating on the future price of a future?
Thank you