Futures Contracts in Risk Management Companies Can Use Trading on a US Essay

Futures Contracts in Risk Management Companies Can Use Trading on a US Exchange - Essay Example This essay not only analyzes risk strategies and types, that are present in the futures contracts and markets in the United States, but also refers these theories to the real example, such as natural rubber futures trading process in Thailand. Detailed commodity futures charts are given by the researcher on the topic of crude oil and natural gas as well as analysis of risks it may have. One such risk that was mentioned in the essay is the quantity that involves that the business restrategizes its activities so as to cover the risk. When a client hedges with futures, he or she is expected to take the opposite position that is held in a cash market. Firms holding a long cash position then sells the assets that they have, they are said to have a short hedge to protect them. On the other hand firms hold a short cash position then sells their assets to protect from upward price experience is the cash market are said to have a long hedge. In conclusion, author states that a successful futu res market requires several factors to succeed. For instance, the contract that is in trade must conform to conditions that relate to the physical market. This is likely to limit the chances of price distortion operations. Futures markets are operated so as to provide information for making manufacturing decisions. It is a necessity to have a future strategy that will last long enough to inform the market stakeholders about the risks they might face. This would enable them decisions that would protect their business interests.