Futures

What this video covers

• Why both parties to a futures contract are obligated to perform, and how this differs from an option buyer's right to walk away
• How futures are regulated by the Commodity Futures Trading Commission (CFTC), not the Securities and Exchange Commission (SEC)
• Why futures margin is a performance bond, not a loan, and that no interest is charged on this deposit
• How mark-to-market works, and why a margin call requires restoring the account to the initial margin level (not just maintenance) with variation margin
• What a forward contract is: a private, customized over-the-counter (OTC) agreement with no clearinghouse, no daily settlement, and full counterparty risk
• The seven-way comparison between futures and forwards that the exam loves to test: venue, terms, counterparty risk, daily settlement, margin, liquidity, and regulation