Delivery Process

[mastvikas]

Hi There,

Need help in below explanation-:

The contract price can differ between 2 contracts .If you are initially long one contract at $970 per ounce of gold and subsequently sell (i.e., take the short position in) an identical gold contract when the price is 950 per ounce, $20 multiplied by the number of the ounces of the gold specified in the contract will be deducted from margin deposit account. the sale of the future ends exposure the exposure to future price fluctuations on the first contract. your position has been reversed,or closed out , by a closing trade.

Vikas

 

[ShaktiRathore]

The futures are marked to market daily and therefore settled daily at the end of trading day. SO if you are long futures 970 and the futures drops in value to 950 then the loss of 20 will be deducted from the margins account. And your futures value will be market to market to 950 by the end of the trading day . now suppose the next trading day futures close at 970 again then the futures is marked to market to this value of 970 with no deduction from margins account. So in this way futures are marked to market value and any loss that occur on futures will be deducted from margins account and once this margin account falls below a maintenance margin then it needs to be refurnished to the initial margin value. This process keeps going on till the futures contract is settled finally upon its maturity. I hope u understood,

thanks