Future Dated Delivery Trades

What is a Future Dated Delivery Trade?

In a future dated delivery trade a buyer and a seller agree to trade an asset at a predetermined price on a specific future date, with settlement of the trade occurring on a date beyond the standard spot date.

If the market price of the asset at maturity is higher than agreed forward price, the buyer profits by purchasing at the lower forward price and potentially selling at the higher market price. Conversely, if the market price at maturity is lower than the forward price, the seller profits by selling at the higher forward price compared to the lower market price.

In Forward contracts involving physical delivery of the underlying asset the seller delivers the underlying asset to the buyer on the maturity date, and the buyer pays the pre-agreed price.

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Advantages of Future Dated Delivery Trades

• Hedging against fluctuations in the underlying asset: The parties secure a price deemed suitable for the transaction, thus mitigating the risk of price volatility.
• Profiting from arbitrage opportunities arising from discrepancies between the asset's spot price and the forward price.
• Enabling efficient capital utilization by leveraging the anticipated price movements of the underlying asset with a lower initial capital outlay.
• There is no daily mark-to-market settlement (i.e., the profit or loss is realized only upon the contract's maturity).

Margin handling

• Initial margin per lot according to qualified asset. Margin reduction based on positions accross different eligible maturities.
• BYMA manages the margin deposited by the buyer/seller, providing certainty to the transaction.
• Margin call when there is an unfavorable variation in the traded asset exceeding 50% of the initial margin deposited at the start.