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Anonymous
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Asked: 2019-11-26T00:28:42+00:00 In: ,

What are steel futures and how does the futures market work?

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What are steel futures and how does the futures market work?

In a futures market, investors buy and sell assets (commodity/future contracts) for delivery on a specified future date. These are regulated markets.

How do the steel futures contracts work? Can there be any physical deliveries if required?

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    1. Mehmet
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      Under a futures contract, steel buyer/seller is committed to buy or sell a specific tonnage of a particular type/grade of steel for a fixed settlement date in the future at a price agreed today.

       

      A futures contract works by creating a cash flow which is used by the hedger to offset the impact of steel price movements on the contracted steel product.

      Characteristic of steel futures markets:

      • Exchange members are the gateway to the market
      • Members are regulated by the exchange state-appointed regulators
      • Exchanges are regulator but also regulated by the state regulators

      The chart shows how the physical and futures markets interactions.

      Steel futures interactions with a physical market

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