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Commodities General FAQ |
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1. |
What are commodities? |
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Any bulk good that is usually bought and
sold via futures contracts such as grains, meats, and
metals. At Sun Hung Kai Commodities Limited (SHKCL), our
trading products comprise: Comex Gold, Comex Silver, Comex
Copper, Platinum, Wheat, Crude Oil, Pork Bellies, Live
Hogs, Soybean, Corn, Sugar, etc. |
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2. |
What are the futures markets
about? |
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The futures markets are described as continuous
auction markets and exchanges providing the latest information
about supply and demand with respect to individual commodities,
financial instruments, and currencies. Futures exchanges
are where buyers and sellers of an expanding list of commodities,
financial instruments, and currencies, come together to
trade. |
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3. |
What is a Futures Contract? |
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An agreement to buy or sell a commodity
(or financial instrument) at a price agreed now but to
be delivered or cash settled on a specified date in the
future (expiry date/settlement date). |
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4. |
What is an Option Contract? |
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An option contract is the right (but not
the obligation) to buy (or sell) a specific commodity
at a specific price by a certain date (expiration date). |
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5. |
What is hedging? |
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Hedgers are individuals and firms who wish
to establish a known price level weeks and sometimes months
or years in advance for products they want to buy or sell
in the cash market. This futures position protects them
against unfavourable price changes in the interim that
might occur. Alternatively, a hedger may want to establish
a guaranteed margin between their purchase cost and their
selling price. |
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6. |
What is arbitrage? |
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The buying or selling of a commodity in
one market and immediately transacting an opposite trade
of an equal amount of the same commodity in a different
market, in order to capture a risk less profit. |
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7. |
What is "Minimum Price
Changes" (Minimum Fluctuation)? |
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The minimum amount that the price can fluctuate
up or down is determined by the exchange. This minimum
amount is known as the tick. Consider a gold futures contract,
the tick is 10 cents per ounce. This amounts to $10 on
a 100-ounce contract. |
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8. |
What is "Daily Limit"? |
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Futures contracts have maximum limits as
to the amount (price) the contract can move during the
day. The exchanges set these limits. Some limits are stated
in terms of percentage up or down, some limits are stated
in terms of plus or minus point as compared with the previous
day's closing price. See our commodities
brochure for more details. It is subject to changes
announced by the Exchange. |
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9. |
What is a Maturity Date? |
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The date on which a futures contract must
be fulfilled. |
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10.What is "Position
Limits" (Contract Size)? |
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The exchanges set maximum amounts of contracts
that can be owned by one person. The purpose of this is
to prevent one individual from cornering the market or
exerting undue influence on the market. Position limits
are stated in number of contracts or total units of the
commodity. |
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FX / Commodities
