Cryptocurrency Q&A
What is the cost of futures?
What is the cost of futures?
ZenFlow
Wed Sep 04 2024
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7 answers
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Good afternoon, I was wondering if you could clarify for me the cost associated with futures trading? I understand that futures contracts allow investors to speculate on the future price of an asset, but I'm unclear on the specific expenses or fees involved. Are there any upfront costs to enter into a futures contract, or are there ongoing fees throughout the duration of the contract? Additionally, how do these costs compare to other types of investments or trading strategies? Thank you for your time and assistance in explaining this to me.
7 answers
Claudio
Fri Sep 06 2024
Futures contracts are financial instruments that derive their value from an underlying asset. The pricing mechanism of these contracts is intricate, incorporating various factors to reflect the current and future value of the asset.
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CryptoChieftainGuard
Fri Sep 06 2024
At the core of futures pricing lies the spot price of the underlying asset. This represents the market price at which the asset can be bought or sold for immediate delivery.
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GangnamGlitter
Fri Sep 06 2024
However, futures contracts involve the delivery of the asset at a future date, necessitating adjustments to the spot price. Interest rates play a crucial role in these adjustments, as they reflect the cost of borrowing or lending money over time.
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SoulStorm
Thu Sep 05 2024
Additionally, the passage of time and the payment of dividends by the underlying asset's issuer can further impact the futures price. These factors are integrated into the pricing formula to ensure the contract's fair value.
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CherryBlossom
Thu Sep 05 2024
The difference between the spot price and the futures price is known as the basis of the spread. This spread represents the market's expectation of how the price of the underlying asset will change between now and the futures contract's expiration date.
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