We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.


Key takeaways from this chapter

  1. The forwards’ contract lays down the essential foundation for a futures contract.
  2. A Forward is an OTC derivative that is not traded on an exchange.
  3. Forward contracts are private agreements whose terms vary from one contract to another.
  4. The structure of a forwards contract is pretty simple.
  5. In a forward agreement, the party agreeing to buy the asset is called the “Buyer of the Forwards Contract.”
  6. In a forward agreement, the party agreeing to sell the asset is called the “Seller of the Forwards Contract.”
  7. A variation in the price would impact both the buyer and the seller of the forwards’ contract.
  8. Settlement occurs in two ways in a forward contract – Physical and Cash settlement.
  9. A futures contract reduces the risk of a forward contract.

12 comments

View all comments →
  1. Madhav Mehta says:

    Nice work! This has to be one of the most professional video that I’ve ever seen. It had my attention from the start to the very end of the video. Thank you for this!
    Madhav

  2. Majid says:

    why is there the v sign and next vedio option in the end . cannot read the key points

    • Karthik Rangappa says:

      Please see the key takeaways right below the video, we have typed them out for your reference.

  3. RAM says:

    Hi Prateek,

    I wanted to know whether the stock prices of Equity shares gets affected due to derivatives or not. If Yes, how does it actually affect.
    Also, please explain how whole Nifty50 index can be an underlying asset if the initial moto of it is only speculation.

    Ur lectures are very nice.

    Thanks

    • Karthik Rangappa says:

      Ram, its the other way round. Prices influence the derivatives. Nifty 50 is not just for speculation, its also benchmarking, hedging, investment etc.

  4. Mohan says:

    If the price went up, the buyer would be happy, right? Because he is going to get the gold at the contracted price (which is lesser than the current market price of gold) from the seller. And the seller would be unhappy. But the video says the other way.
    Or am I missing something here?
    Nice videos by the way!!!

    • Karthik Rangappa says:

      Need to check the video, could be a voice typo. But a buyer benefits when price increases and seller benefits if price decreases.

  5. Nanda says:

    I was having same confusion. Thanks for the explanation.

View all comments →
Post a comment