Trade · 6 pages · 12 min

Why a futures price is not a prediction you must believe

A futures price is the price of a contract today, revised by trades, not an official forecast you are required to accept.

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From the opening

A futures price is the price at which the standardized contract is trading now for later delivery. It is not a prediction you must believe, because it is a cleared bid and offer that will be replaced by the next trade, not a statement issued as a forecast of what cash prices will be. The opening covers the print is a clearing price, the next trade can replace it, and convergence is a delivery mechanic.

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Inside

The print is a clearing price
The next trade can replace it
Convergence is a delivery mechanic
Disagreement is allowed
Where the idea stops applying
A distinction worth keeping

Sources

Futures price as a clearing price
Convergence at futures expiration

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Why a futures price is not a prediction you must believe

From the opening

Inside

Sources

Also on the desk