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The Business of Trading: 101 steps to trading success by John Piper

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34. Futures and Fair Value

In this module I want to talk about and futures markets with particular reference to fair value.

Knowledge is power and I believe the more you know the better you are likely to perform.

The term futures refers to the fact that you are buying or selling a vehicle giving you the right to “delivery” (or obligation to “deliver” if you sell) at some point in the future and this is easier to understand with a commodity like Cocoa.

I used to do some consultation with Rowntrees on the Cocoa price and they would buy Cocoa futures knowing they had a big demand for Cocoa to keep the chocolate factory rolling.

Similarly a Cocoa farmer may be selling futures as he knew his crop would grow and he may want to lock in a good price. ...

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