Markets · 6 pages · 12 min

How a future locks a price

A futures contract fixes a price for a later date, with daily margin keeping both sides honest.

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From the opening

A futures contract binds buyer and seller to a price agreed now for a purchase, a sale, or a cash equivalent on a set later date. Daily margin keeps that promise aligned with the market so neither side can quietly abandon it when the price moves against them. The opening covers the contract names the price, margin settles the move daily, and basis can remain unlocked.

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Inside

The contract names the price
Margin settles the move daily
Basis can remain unlocked
Forwards lock without daily margin
Where the idea stops applying
A distinction worth keeping

Sources

Futures variation margin
Hedging basis between futures and spot

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How a future locks a price

From the opening

Inside

Sources

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