Why the establishment of a futures market in a commodity should not have a significant impact on prices in the spot market for that commodity.
The establishment of a futures market in a commodity should not have a significant impact on prices in the spot market for that commodity because futures are zero sum game.Commodities future contracts agreements to buy or sell a raw material at a specific date in the future at a perticular price.If the prices of the underlying commodity goes up,the buyer of the futures contract makes money.If the price goes down,the future seller makes money.Losses and gains to futures contracts are net to zero,thus should not have significant impact on prices in the spot market for that commodity.
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