Convergence of prices
This query is : Resolved
26 October 2014
Hey,
Just wanted to know how the futures price and the spot price converge on the maturity date.
There is no delivery in the futures market as everything is cash settled. So an individual cannot buy in the spot market and then deliver in the futures market (or vice-versa). However, in a few places (newspapers, FMC site) it is said that there are deliveries made for commodity futures at the maturity date so that the prices converge.
Need a little more clarity on the same as to whether there are any deliveries in the stock segment as well or that is not the case.
Just wanted to know how the futures price and the spot price converge on the maturity date.
There is no delivery in the futures market as everything is cash settled. So an individual cannot buy in the spot market and then deliver in the futures market (or vice-versa). However, in a few places (newspapers, FMC site) it is said that there are deliveries made for commodity futures at the maturity date so that the prices converge.
Need a little more clarity on the same as to whether there are any deliveries in the stock segment as well or that is not the case.
18 November 2014
in stock market futures, there is no any question of delivery.
In commodity market, if the trader so wishes, can opt for delivery.
In commodity market, if the trader so wishes, can opt for delivery.
23 November 2014
Hi Sir,
As in the above question, I understand that the prices can converge in the case of commodity futures. But as you quoted that there is no delivery in the stock segment, how do the prices converge then?
Because it is not possible to buy in the spot market and sell in the futures market or vice-versa.
Kindly help.
As in the above question, I understand that the prices can converge in the case of commodity futures. But as you quoted that there is no delivery in the stock segment, how do the prices converge then?
Because it is not possible to buy in the spot market and sell in the futures market or vice-versa.
Kindly help.
23 November 2014
One major reason is the positions are allowed to be taken upto 90% of the stock
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