Open interest, the total number of open contracts on a security, applies primarily to the futures market. Open interest is a concept all futures traders should understand because it is often used to confirm trends and trend reversals for futures …
What is an Underlying Asset Underlying assets are the financial assets upon which a derivative’s price is based. Options are an example of a derivative. A derivative is a financial instrument with a price that is based on a different …
What Is a Futures Contract? A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future. Futures contracts are standardized for quality and …
What Is a Futures Exchange? A futures exchange is a marketplace where a diverse range of commodities futures, index futures, and options on futures contracts are bought and sold. Those who are allowed access to the exchange are brokers and commercial traders who are …
What Are Futures? Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the …
What Is Time Decay? Time decay is a measure of the rate of decline in the value of an options contract due to the passage of time. Time decay accelerates as an option’s time to expiration draws closer since there’s less time to …