'Oman Crude Oil Futures Contract Essay\r'

'1. change: Dubai Mercantile Exchange\r\n2. Trading building block: 1,000 U.S. lays (42,000 gallons)\r\n3. rack Value: The dilute value shall be the choke-place gag law Price multiplied by atomic turning 53 thousand (1,000) multiplied by the number of flummoxs to be delivered\r\n4. Price Quotation: U.S. dollars and cents per barrel\r\n5. Trading Symbol: OQD\r\n6. Trading Hours : electronic trading is open from 16:00 CST/CDT Sundays and from 17:00 CST/CDT Monday to Thursday and closes at 16:15 CST/CDT the next day, Monday to Friday. 7. Trading calendar months: The current social class and the next five years leave alone be listed. 8. Minimum Price mutant: $0.01 (1) per barrel ($10.00 per contract)\r\n9. Daily answer: A daily OSP settlement set testament be published as at 16:30 Singapore clip. This value represents the weighted average terms of trades in the nearby Contract month betwixt 1625 and 1630 (Singapore). The DME lead also publish an closure of tradin g day settlement hurt for all listed Contract Months, determined as at 13:30 CST/CDT, which coincides with the balance of the trading day for NYMEX Light honeyed Crude Oil.\r\nThis latter settlement worth is utilize by the Clearing suffer to calculate daily variation circumference on all open DME Contracts. 10. Final elimination Price: The Final Settlement Price for a Contract Month shall be the OSP settlement wrong on the last Trading solar day of the Contract Month. This determine represents the weighted average expense of trades in the nearby Contract Month between 1615 and 1630 Singapore Time. The Final Settlement Price get out be used for purposes of margins for pitch shot of the Oil. 11. Last Trading Day\r\nTrading in the nearby Contract Month shall cease on the last Trading Day of the second month preceding the Delivery Month. 12. Settlement showcase :Physical\r\n13. Delivery: F.O.B at the onus Port, consistent with current terminal operations. established de livery rules and provisions atomic number 18 little in Chapter 10 of the rulebook. 14. Governing virtue: English Law\r\nThe hereafter cost always foregathers towards the line price. From the formula side, succeeding(a) quote F=S0 (1+(r+a)T), S0 is the blemish quote, r is the post rate for the future months, a is the salute of carrying. As it comes closer to the delivery day, T sustains smaller. On the former(a) hand, the direct up of entrepot and the interests of loans reduce as time goes by. Therefore, S0(r+a)T decreases. When it is the delivery day, which means that T equals to 0, S0(r+a)T =0, and the future quote F=S0.\r\nOn the other side, there are always dissimilar opinions for investors. For the sensitive vegetable anele futures contract, if an airline club wants to buy a large tote up of crude oil at a fixed price in the future, it will currently buy crude oil futures to hedge the risk of fluctuation of oil price. Mean sequence, there may be many specula tors who expect that the oil price in the future will go crop up, thereof they will currently remove crude oil futures. Due to massive speculations in the futures market, the futures price and spot price become similar as time goes by.\r\nFor example, on 11/13/2012, I exchange 10 contracts of 6-month crude oil futures, which will be delivered on 5/13/2013, and the spot price is 103.14 $/ barrel. Suppose the interest rate for 6 months is 2%, and cost of carrying is 1% of spot price, The nominal measurement of 10 contracts is 10000 $. The price of the futures should be F=103.14(1+(1%+2%)*0.5)=104.69$. If the futures settlement price traded on the market today is cxv$, the quantity that should be delivered is Q=10000/cxv=86.96 barrels. 1. I need to borrow 103.14* 86.96=8968.70$ for 6 months.\r\n2. Buy 86.96 barrels crude oil. 3. workshop the oil for 6 months, cost of storage is 8968.70*1%*0.5= 44.84$ 4. After 6 months, I deliver the oil at one hundred fifteen$/ barrel and receiv e 10000$. And I pay loan interest, which is 8968.70 (1+2%*0.5)=9058.38$ 5. The trade is 10000-44.84-9058.38=896.77$, which is a gain.\r\nIn this case, I count on that the futures price is higher than spot price, and speculators are willing to buy be asset, and sell futures contract in order to trade name profits. As a result, the spot price will go up while the futures price will go down. Finally, the futures price will converge to the spot price of underlying asset.\r\nWhen the futures price is lower than spot price, and speculators will buy futures contract, and sell underlying asset in order to make profits. In this way, As a result, the spot price will go down while the futures price will go up, and finally the futures price will converge to the spot price of underlying asset.\r\n'