Define long position in future contract and options contract, Financial Management

Assignment Help:

What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract?

Answer: A futures or forward contract is a vehicle for selling or buying a stated amount of foreign exchange at a stated price per unit at a fixed time in the future. Determine that if the long holds the contract to the delivery date, he pays the effectual contractual futures (or forward) price, consider whether it is an advantageous price in comparison to the spot price at the delivery date.  By difference, an option is a contract providing the long the right to buy or sell a fixed quantity of an asset at a specified price at some time in the future, although not enforcing any obligation on him if the spot price is much more favorable as compared to the exercise price.  Since the option owner does not have to exercise the option if it is to his disadvantage, the option has a price, or premium, while no price is paid at inception to enter into a futures (or forward) contract.


Related Discussions:- Define long position in future contract and options contract

What is the financial leverage effect and what causes it, What is the finan...

What is the financial leverage effect and what causes it?  What are the potential benefits and negative consequences of high financial leverage? Monetary leverage is the additi

Show objections against profit maximization, Q. Show objections against pro...

Q. Show objections against profit maximization? 1) Profit cannot be ascertained well in advance to express the. Probability of return as future is Uncertain. It is not at all p

Role of securities firms in investment intermediaries, What is the role of ...

What is the role of securities firms in investment intermediaries? Securities firms assist within the trading of existing securities into the secondary markets. The two major c

Financial assets, Financial assets: Financial assets/instruments repres...

Financial assets: Financial assets/instruments represent the financial obligations that arise when the borrower raises funds in the financial market. In exchange for the funds

Management of Financial Institution, 1. Why do the banks borrow funds, besi...

1. Why do the banks borrow funds, besides accepting deposits? Discuss in detail the various sources from where banks can borrow funds within India.

Unemployed loans, where can i found a loan if i am unemployed ?

where can i found a loan if i am unemployed ?

Pay in interest over first year of its eurodollar loan, A company borrows $...

A company borrows $1,500,000 at LIBOR plus a lending margin of 1.25 percent per year on a six-month rollover basis from a London bank.  If six-month LIBOR is 4 ½ % over the first s

Financial projections, A total of $426,000 seed-funding would be ideal to s...

A total of $426,000 seed-funding would be ideal to start the project on a local basis. The cost analysis done above is for the material required to perform the work, and as the wor

Capital budgeting.., Assignment II Describe capital budgeting techniques wi...

Assignment II Describe capital budgeting techniques with formulas and examples.

Medium-term notes (mtns) , Medium-term notes are debt instrumen...

Medium-term notes are debt instruments that can be offered continuously to an investor. An agency of the issuer offers these; and these are avai

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd