14. The Value of Forward Contract and Its Implications.

From a theoretical standpoint , in determining the forward price can distinguish two concepts . The first is that the forward price arises as a consequence of future expectations of the derivatives market participants about the future spot price . The second concept is based on an arbitration approach.

In accordance with the provisions of the first concept , the participants try to take account of economic relations and analyze all the information available to them about the future situation and determine the future spot price . Arbitration approach is based on the technical relationship between the forward and the current spot price , which is determined by the prevailing market rate without risk. It is based on the proposition that the investor in terms of financial decisions should be indifferent in relation to the acquisition of the underlying asset in the spot market now or forward contract in the future. During the term of the forward contract dividends on shares can either be paid or not.

If the per share dividend paid during the term of the forward contract , the forward price is necessary to adjust its value , since acquiring the contract , the investor will not receive the dividend . In addition, there is the concept of the forward price of a currency based on the so-called interest rate parity , the meaning of which is that the investor should receive the same income from placing funds at interest without risk both in national and foreign currencies . Both options should bring investors the same result. Otherwise there will be an opportunity to make arbitrage transactions .

14. Types of Futures Trading Contracts

There are mainly two types of futures trading contracts. They are futures contracts which are traded for physical delivery, known as commodities and futures contract which are end with a cash settlement, known as financial instruments. Both types of futures contracts are traded electronically and directly.

Futures contracts which are traded for physical delivery includes agricultural commodities like wheat, oats, sugar etc, energy products like crude oil, heating oil, natural gas etc, or animals. Note that very commodity futures contracts actually end in delivery. Often these contracts are traded just like shares of a stock market, according to the changes in price trends. Online futures traders include both speculators and hedgers. Futures contracts which are traded for cash settlement involve treasury notes, bonds, etc. These futures are also known as currency futures and are often traded just like commodity futures though electronic platforms.

This information is provided by NobleTrading.com, a worldwide brokerage firm, offering direct access services for online stocks trading, options trading, futures trading, commodities trading and forex trading on a variety of trading software platform

14. London International Financial Futures - is one of the centers of futures trading

The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') is a futures exchange based in London. LIFFE is now part of NYSE Euronext following its takeover by Euronext in January 2002 and Euronext's takeover by New York Stock Exchange in April 2007.

LIFFE accredited traders, particularly those engaged in the open outcry trading pits, could and did earn high salaries at the price of a demanding and stressful job. Floor support personnel (Runners, Midoffice and exchange staff), in contrast, usually earned a lot less. LIFFE floor staff were easily identified by their distinctive and brightly coloured blazers (yellow jackets for Runners) and badges with three-letter IDs called 'Mnemonics'

LIFFE pit traders and locals (Traders trading on their own account, betting their own funds) in particular enjoyed a reputation of a lavish lifestyle - pubs and wine houses along Cannon Street were filled with LIFFE personnel at all times of the day and night. Visitors to the LIFFE floor were often surprised by the harsh emotional conditions and chaotic-looking floor, with paper snipplets covering the floor and abuse frequently being yelled, albeit jokingly, at them.

During most of its existence as an independent exchange, LIFFE used the open outcry system to facilitate trades. LIFFE's reluctance to change to an electronic trading system was a cause of its downfall. By the time LIFFE had implemented LIFE CONNECT, a widespread electronic trading platform, fully electronic exchanges had been in operation for almost 10 years and had already snatched up a sizable market share.