The futures price refers to the price at which a futures contract for a particular asset or commodity can be bought or sold on a specified future date. It represents the market's expectation of the future value of the underlying asset, taking into account factors such as supply and demand, interest rates, dividends, storage costs, and other market conditions.
Commodity futures price:
Commodity futures prices represent the expected future value of commodities such as gold, crude oil, wheat, and others. These prices are influenced by factors such as global demand, geopolitical events, weather conditions, and supply chain disruptions, among others.
Stock futures price:
Stock futures prices indicate the anticipated future value of individual stocks or stock market indices. These prices are influenced by factors such as company earnings, market sentiment, economic indicators, and regulatory developments.
Futures price formula:
The futures price is calculated using the cost of carry model, which takes into account the current spot price of the asset, the risk-free interest rate, storage costs, and any dividends or income generated by the asset. The formula for calculating the futures price is:
Futures Price=Spot Price + Cost of Carry
Where:
- Spot Price: The current market price of the underlying asset.
- Cost of Carry: The sum of financing costs, storage costs, and any income earned from holding the asset until the futures expiration date.
By incorporating these factors, the futures price formula helps market participants estimate the fair value of futures contracts and make informed trading decisions.
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