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Member Posts: 118 |
Futures arecontracts to buy or sell a given amount of an item, in this casegold, on a particular date in the future. Futures are traded incontracts,not shares, and represent a predetermined amount of gold. As thisamount can be large futures are more suitable for experiencedinvestors. People often use futures because the commissions are verylow, and the marginrequirementsare much lower than in traditional equity investments. Some contractssettle in dollars while others settle in gold, so investors must payattention to the contract specifications to avoid having to takedelivery of 100 ounces of gold on the settlementdate. Options on futures are an alternative to buying a futures contract outright.These give the owner of the option the right to buy the futurescontract within a certain time frame at a preset price. One benefitof an option is it both leveragesyouroriginal investment and limits losses to the price paid. A futurescontract bought on margincanrequire more capitalthanoriginally invested if losses mount quickly. Unlike with a futuresinvestment, which is based on the current value of gold, the downsideto options is that the investor must pay a premium to the underlyingvalue of the gold to own the option. Because of the volatilenatureof futures and options, they may be unsuitable for many investors.Even so, futures remain the cheapest (commissions + interest expense)way to buy or sell gold when investing large sums. source : http://stocks-mcx-gold-tips.blogspot.com
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Member Posts: 52 |
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