Arbitraging Futures Contracts II
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Uploader Comments (khanacademy)
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the 5% is a risk free interest rate, at a insured bank account or federal bond
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@imbagogo Maybe from a bond, or bank deposite.
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What I don't get is - where would he be earning that 5% interest from?
Thanks
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@khanacademy Thanks for the explanation.
Are you going to discuss any other financial subjects? You seem to have addressed everything under the sun.
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@khanacademy Does that mean non-financial topics aren't going to be purposely short?
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Maybe I missed it, but where did the 5% come from?
vway2 11 months ago
@vway2 Just made it up.
khanacademy 11 months ago
Possible error. When you buy the contract delivering the apples on 10/20, doesn't the broker demand the full $200 immediately or margin at minimum? That would result in a lower net profit or loss. Are you waiting for 10/20 to approach, which takes on the risk of an increase in the price of apples?
Otherwise, are you now buying call options on futures contracts, which still charge a premium to the buyer?
Thanks.
siggyboss 11 months ago
@siggyboss Yes, if we are dealing with futures contract, the exchange would have required an extra 10% in the margin account. Borrowing this money at, say, 10% would lower the profit somewhat (by maybe $2) but it will still be there.
khanacademy 11 months ago
something of topic...why are you keeping this short? Ive seen you history vids with 17 minutes. . .
Manodragon 11 months ago
@Manodragon A financial network has expressed interest in showing these videos on their website (and possibly their TV channel). They need to be under 4 minutes though. I am still getting used to not having as much time as I'd like :)
khanacademy 11 months ago 2