## Fair value of commodity futures

Theoretical or fair value is a mathematical estimation of the price that a particular future contract Theoretical value of commodity future held for consumption.

Commodities, currencies and global indexes also shown. Where the stock market will trade today based on Dow Jones Industrial Average, S&P 500 and Nasdaq-100 futures and implied open premarket values. This type of analysis is what traders call fair value futures trading. Futures fair value is defined as the price of the contract at which a buyer of the underlying asset would be neutral between buying the underlying and buying the future. Since the fair value relates to the front-running contract, it is treated as a metric in determining whether it’s a better economic decision to buy the underlying asset at its current price or if it’s more reasonable to buy the futures contract. The fair value is the value at which a futures price should trade in order to allow no arbitrage between the futures and the cash market. Basically you can calculate the fair value by comparing the discounted cash flow (net present value) associated with the forward or futures contract to the spot market price. Fair value is the theoretical assumption of where a futures contract should be priced given such things as the current index level, index dividends, days to expiration and interest rates. The actual futures price will not necessarily trade at the theoretical price, as short-term supply and demand will cause price to fluctuate around fair value. When referring to "fair value" one is simply taking the present value of the S&P 500, or cash, and factoring in the borrowing costs to own all of the stocks in the index, dividends and difference Dow Futures Vs. Fair Value. When you see that the DOW futures are up on a morning financial program, you may be tempted to assume that means the market opening will be up as well. However, you

## However by and large the fair value reflects where the futures should be trading at a given risk 1) Spread trading with Currency and commodities is the same.

“commodity” shall not include (a) a numismatic coin whose fair market value “Commodity Futures Trading Commission” means the independent regulatory  A futures contract derives its value from the underlying commodity. Fair and transparent spot price discovery is importance when it is understood the role it  15 Apr 2019 When a commodity is promised for a future date, a price is sometimes locked in place in advance. This is called the futures price. However, the  10 Sep 2019 What began as a lawsuit instituted by the Commodity Futures Trading on farmers by denying them the fair value of their hard work and crops. 12 Sep 2009 These commodities include metals, meats, grains, unique items, and financial As the market value of the futures contract changes, the change is The unrealized change in the fair value of the item can be accounted for  19 Oct 2012 The past, present and future of the 'fair trade' movement . Notional value of outstanding commodities futures and options traded OTC and on