The clearinghouse is protected from losses by setting margin requirements for buyers and sellers of futures. Arbitrageurs assure that on the day before the delivery date a futures contract, the futures price is very close to the spot price. As the time comes closer to the delivery date of the futures contract, the length of time funds are borrowed for reduces. Therefore, the carrying costs are reduced and the futures price approaches the spot price as the delivery date nears. Arbitrageurs make riskless profits by buying in one market and reselling in another market.
Speculators attempt to gain profits by engaging in risky operations.
As the time comes closer to the delivery date of the futures contract, the length of time funds are borrowed for reduces. Therefore, the carrying costs are reduced and the futures price approaches the spot price as the delivery date nears. Put options are options that give the buyer the right but not the obligation to sell a standardized contract of financial asset at a strike price determined today. Call Options are options that give the buyer the right but not the obligation to buy a standardized contract of a financial asset at a strike price determined today. The option premium is paid by the buyer of the option to compensate the seller for accepting the risk of a loss with no possibility of a gain.