Animal Science and the Industry. Common Core/Next Generation Science Standards Addressed CCSS.ELA-Literacy.RH.9-10.4 - Determine the meaning of words.

Slides:

Advertisements

Similar presentations

Copyright© 2003 John Wiley and Sons, Inc. Power Point Slides for: Financial Institutions, Markets, and Money, 8 th Edition Authors: Kidwell, Blackwell,

Advertisements

Forward and Future Contracts

FINC4101 Investment Analysis

What are CFD’s In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating.

Copyright© 2006 John Wiley & Sons, Inc.1 Power Point Slides for: Financial Institutions, Markets, and Money, 9 th Edition Authors: Kidwell, Blackwell,

Basic Option Trading Strategies. Definition What is an option? The option is a right to buy 100 shares, or to sell 100 shares. Every option has four specific.

 Derivatives are products whose values are derived from one or more, basic underlying variables.  Types of derivatives are many- 1. Forwards 2. Futures.

1 FINA0301 Derivatives Faculty of Business and Economics University of Hong Kong Dr. Huiyan Qiu Chapter 2 An Introduction to Forwards and Options.

Chapter 2 An Introduction to Forwards and Options.

©2007, The McGraw-Hill Companies, All Rights Reserved Chapter Ten Derivative Securities Markets.

24-0 Forward Contracts 24.3 A contract where two parties agree on the price of an asset today to be delivered and paid for at some future date Forward.

Using Options to Enhance Marketing

Price Risk Management Jim Dunn Penn State University.

Computational Finance 1/47 Derivative Securities Forwards and Options 381 Computational Finance Imperial College London PERTEMUAN

Learning Objectives “The BIG picture” Chapter 20; do p # Learning Objectives “The BIG picture” Chapter 20; do p # review question #1-7; problems.

Chapter 20 Futures.  Describe the structure of futures markets.  Outline how futures work and what types of investors participate in futures markets.

Chapter 14 Futures Contracts Futures Contracts Our goal in this chapter is to discuss the basics of futures contracts and how their prices are quoted.

Copyright © 2002 Pearson Education, Inc. Slide 9-1.

Derivatives Markets The 600 Trillion Dollar Market.

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill /Irwin Chapter Ten Derivative Securities Markets.

Lecture 3: Strategies. A Few Option Strategies u Options give the opportunity to use an investment strategy that would not be possible by investing directly.

Copyright© JSE Limited “Grow” your understanding about trading commodity derivatives….. 1.

Hedging with Futures Dillon M. Feuz Utah State University.

Options on Futures Contracts. Additional Resources Introduction to Options CME Options on Futures: The Basics.

Finance 300 Financial Markets Lecture 23 © Professor J. Petry, Fall 2001

Copyright © 2008 Pearson Addison-Wesley. All rights reserved. Chapter 15 Commodities and Financial Futures.

Lecture Presentation Software to accompany Investment Analysis and Portfolio Management Eighth Edition by Frank K. Reilly & Keith C. Brown Chapter 20.

Currency Derivatives 5 5 Chapter South-Western/Thomson Learning © 2006.

Module Derivatives and Related Accounting Issues.

Hedging Strategies Using Derivatives. 1. Basic Principles Goal: to neutralize the risk as far as possible. I. Derivatives A. Option: contract that gives.

21 Risk Management ©2006 Thomson/South-Western. 2 Introduction This chapter describes the various motives that companies have to manage firm-specific.

Definitions of Marketing Terms. Cash Market Definitions  Cash Marketing Basis – the difference between a cash price and a futures price of a particular.

Commodity Futures Meaning. Objectives of Commodity Markets.

BASICS OF DERIVATIVES BY- Masoodkhanrabbani Dated-july 28 th 2009.

Copyright© 2006 John Wiley & Sons, Inc.1 Power Point Slides for: Financial Institutions, Markets, and Money, 9 th Edition Authors: Kidwell, Blackwell,

Investment and portfolio management MGT 531.  Lecture #31.

Financial Derivatives Chapter 12. Chapter 12 Learning Objectives Define financial derivative Explain the function of financial derivatives Compare and.

Chapter 26 – Futures Markets Forward Contracts A contract that two parties agree to today such that both parties are obligated to complete a transaction.

Intermeiate Investments F3031 Futures Markets: Futures and Forwards Futures and forwards can be used for two diverse reasons: –Hedging –Speculation Unlike.

Derivatives. What is Derivatives? Derivatives are financial instruments that derive their value from the underlying assets(assets it represents) Assets.

Trade Management  Module 4.  Learning Objectives:  Managing receivables  Securing receivables  Sales documentation.

Becoming Familiar With Options Becoming Familiar With Options Objectives: Define options Understand puts and calls Define strike price and premiums and.

Foreign Currency Risk Part 1 Mark Fielding-Pritchard mefielding.com1.

1 Futures Chapter 18 Jones, Investments: Analysis and Management.

Chapter 14 Financial Derivatives. © 2013 Pearson Education, Inc. All rights reserved.14-2 Hedging Engage in a financial transaction that reduces or eliminates.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 Derivatives: Futures, Options, and Swaps.

SECTION IV DERIVATIVES. FUTURES AND OPTIONS CONTRACTS RISK MANAGEMENT TOOLS THEY ARE THE AGREEMENTS ON BUYING AND SELLING OF THESE INSTRUMENTS AT THE.

Animal Science Industry Animal Science Industry. Common Core/Next Generation Science Standards Addressed CCSS.ELA-Literacy.RH Determine the meaning.

Chance/BrooksAn Introduction to Derivatives and Risk Management, 8th ed.Ch. 11: 1 Chapter 11: Forward and Futures Hedging Strategies Hedging is the tai.

Hedging with a Put Option. The Basics of a Put  Put options provide producers a flexible forward pricing tool that protects against a price decline.

1 Agribusiness Library Lesson : Hedging. 2 Objectives 1.Describe the hedging process, and examine the advantages and disadvantages of hedging. 2.Distinguish.

The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness.

Options Market Rashedul Hasan. Option In finance, an option is a contract between a buyer and a seller that gives the buyer the right—but not the obligation—to.

Using Futures Commodity Marketing Activity Chapter #4.

1 Agribusiness Library Lesson : Options. 2 Objectives 1.Describe the process of using options on futures contracts, and define terms associated.

CHAPTER 11 FUTURES, FORWARDS, SWAPS, AND OPTIONS MARKETS.

Marketing Chapter #7. What is Marketing? u All the economic activities involved in preparing and positioning the product for the final consumer.

Currency Derivatives 5 5 Chapter South-Western/Thomson Learning © 2006.

Derivatives  Derivative is a financial contract of pre-determined duration, whose value is derived from the value of an underlying asset. It includes.

 Options are binding contracts that involve risk, and are time bound  You buy an option when you want to protect a “position” (long or short on a stock)

11 Financial Derivatives Basic Understanding about Future i.Futures are always Exchange Traded (where as forward are always OTC Product). ii.Futures.

© 2013 Pearson Education, Inc., publishing as Prentice Hall. All rights reserved.2-1 The Payoff on a Forward Contract Payoff for a contract is its value.

Financial Risk Management of Insurance Enterprises Forward Contracts.

MINERALS MARKETING By RICHMOND OSEI-HWERE FACULTY OF LAW, KNUST.

MANAGING COMMODITY RISK. FACTORS THAT AFFECT COMMODITY PRICES Expected levels of inflation, particularly for precious metal Interest rates Exchange rates,

Foreign Exchange Derivative Market  Foreign exchange derivative market is that market where such kind of financial instruments are traded which are used.

Animal Science and the Industry

5 Chapter Currency Derivatives South-Western/Thomson Learning © 2006.

The Marketing Puzzle = + Price Kim Anderson

Chapter 15 Commodities and Financial Futures.

Presentation transcript:

Animal Science and the Industry

Common Core/Next Generation Science Standards Addressed CCSS.ELA-Literacy.RH Determine the meaning of words and phrases as they are used in a text, including vocabulary describing political, social, or economic aspects of history/social science. CCSS.ELA-Literacy.RH Determine the meaning of words and phrases as they are used in a text, including vocabulary describing political, social, or economic aspects of history/social science. WHST Draw evidence from informational texts to support analysis, reflection, and research. (HS-PS1-3 WHST Draw evidence from informational texts to support analysis, reflection, and research. (HS-PS1-3 HSA-SSE.A.1 - Interpret expressions that represent a quantity in terms of its context. (HS-PS2-1),(HS-PS2-4) HSA-SSE.A.1 - Interpret expressions that represent a quantity in terms of its context. (HS-PS2-1),(HS-PS2-4)

Bell Work What is a future ? What is a future ? What is a market ? What is a market ? Name 3 places you can check the futures market Name 3 places you can check the futures market

Understanding Futures Contracts and Governmental Programs

Interest Approach Tell students that you will give them one point for each extra credit assignment they turn in today. Tell students that you will give them one point for each extra credit assignment they turn in today. Next, tell them you might give them three points for each extra credit assignment they turn in next week, but they have to do them today. Ask the students which they would prefer, one point today or maybe three points next week. Is it worth hurrying to get them done if you only get one point instead of three? Next, tell them you might give them three points for each extra credit assignment they turn in next week, but they have to do them today. Ask the students which they would prefer, one point today or maybe three points next week. Is it worth hurrying to get them done if you only get one point instead of three?

Student Learning Objectives Describe the futures market Describe the futures market Describe Hedging Describe Hedging Explain margin calls and option contracts Explain margin calls and option contracts

Terms Basis Futures price HedgingMarginPut

What is the futures market? It is the complex system of selling commodities using forward pricing It is the complex system of selling commodities using forward pricing Uses futures pricing in trading commodities Uses futures pricing in trading commodities

Future price is the quoted price for a commodity to be delivered in a pre-determined month. Future price is the quoted price for a commodity to be delivered in a pre-determined month.

This does not guarantee the actual price of the commodity, it is only an estimate. This does not guarantee the actual price of the commodity, it is only an estimate. Actual price will be based on a number of factors present in the future. Actual price will be based on a number of factors present in the future.

What is hedging? Hedging is the use of futures market to set a price for future commodities. Hedging is the use of futures market to set a price for future commodities. In order to set the selling price, producers must sell a futures contract ensuring the delivery of their commodity at a specific time. In order to set the selling price, producers must sell a futures contract ensuring the delivery of their commodity at a specific time.

True hedge involves the producer selling their commodity on the cash market and buying back the futures contract at the same time. Basis is the difference in price between these two transactions.

Difference is commonly the cost of transportation. Difference is commonly the cost of transportation. Ex. Transportation costs are high for livestock, therefore the basis for livestock is negative. Ex. Transportation costs are high for livestock, therefore the basis for livestock is negative.

Basis risk occurs when the basis is higher than the anticipated basis. Basis risk occurs when the basis is higher than the anticipated basis. To prevent loss, the producer can follow through with the original futures contract. To prevent loss, the producer can follow through with the original futures contract. Producer must be sure that the product meets the contract specifications. Producer must be sure that the product meets the contract specifications.

What are margin calls and option contracts? A margin call occurs when the contract holder has to put up a margin. A margin call occurs when the contract holder has to put up a margin. Margin is a minimal amount of money paid towards a futures contract. Margin is a minimal amount of money paid towards a futures contract.

Margin calls can be troublesome because they require a large sum of money on short notice. Margin calls can be troublesome because they require a large sum of money on short notice.

Before placing a hedge it is important to know the cost of producing the product and have extra money available to meet any unexpected margin calls. Before placing a hedge it is important to know the cost of producing the product and have extra money available to meet any unexpected margin calls.

There are options available to help eliminate margin calls There are options available to help eliminate margin calls One option is called a put One option is called a put Put is a contract that allows the producer to back out of the trade. Put is a contract that allows the producer to back out of the trade. Similar to an insurance policy for the seller, they are guaranteed the price they want to sell at. Similar to an insurance policy for the seller, they are guaranteed the price they want to sell at.

The other option is a call option The other option is a call option A call option gives the buyer the right to force the seller to sell on demand. A call option gives the buyer the right to force the seller to sell on demand. This is like an insurance policy for the buyer, they are guaranteed the price they want to buy at. This is like an insurance policy for the buyer, they are guaranteed the price they want to buy at.

Review What is the futures market? What is the futures market? What is hedging? What is hedging? What are margin calls and option contracts? What are margin calls and option contracts?

The End!