Series 3. Ch. 1.
What two ways are trading on the Merc conducted?
#1. Open outcry #2. the CME Globex electronic trading platform. EXPLAINED: The largest percentage of total volume at the exchange occurs electronically on the CME Globex and takes place up to 22 hours a day on the CBOT futures on corn, soybean, oat, rough rice, and ethanol.
A negative basis is also referred to as ... ?
'cash under futures'. Which points to cash prices that are below the futures. A positive basis is referred to by many as 'cash over futures'.
Cocoa, Coffee, OJ and Sugar are often referred to as ...
'softs'
What are some examples of contract markets?
1. CME (Chicago Mercantile Exchange Group. 'the Merc' 2. CBOT (Chicago Board of Trade) (merged with CME Group) 3. NYM (New York Mercantile Exchange) (part of CME Group) 4. COMEX (Commodity Exchange Incorporated (a division of NYMEX)
What are the five components of a typical forward contract?
1. Quantity of the commodity 2. Quality of the commodity 3. Time of delivery 4. Place of delivery 5. Price to be paid at delivery. *. Although the price of the commodity may be set when the forward contract is initiated, the agreed-upon price may be the cash market price on the delivery date, thus subjecting both parties to price risk.
Who does a strengthening basis benefit?
A strengthening basis benefits the Short Hedger. ( a Selling Hedge) A Short Hedger - is someone who owns or deals/sells in the commodity that they are buying futures in. They protect the future prices of the commodity they are selling by selling futures. * a Short Hedger is - 'Long the spot and short the futures.'
Who does a weakening basis benefit?
A weakening basis benefits a Long Hedger. ( a Buying Hedge) Long Hedger - is someone who will need to. buy the commodity in the future and wants to protect the future purchasing price/cost to them by buying Futures contracts. * a Long Hedge is - 'Short the spot and long the futures.'
A speculator purchases 3 heating oil Sep futures (42,000 gals) at .5650. If heating oil futures drop 2%, what is the speculator's loss? A) $1,423.80 B) $474.60 C) $3,390 D) $1,130
A) $1,423.80 42 gal/barrel, 1,000 barrels × 3 contracts $0.5650 × .02% = $.0113 × 3 × 42,000 = $1,423.80
Which of the following describe(s) hedging? A) Transfers price risk to others B) Increases the need for working capital C) Substitutes the trustworthiness of an individual for that of an exchange D) Decreases long-term profits
A) Transfers price risk to others - Hedging is method of transferring price risk to others. This is a useful tool often used by companies to deal with commodity price risk. This allows management to focus on the central core of their business rather than the peripheral risks and speculation of commodity prices.
A processor holding an inventory of cottonseed oil who shorts soybean oil futures has placed a A) cross-hedge B) box spread C) processing spread D) weighted hedge
A) cross-hedge When a processor hedges a position in actuals (e.g., cottonseed oil) with an opposite position in a futures contract based on a different commodity (e.g., soybean oil), he has placed a cross-hedge. A processing spread occurs when a processor buys (goes long) futures contracts on its inputs and sells (short) on its outputs. A weighted hedge occurs when the futures position is larger or smaller than the actuals position it protects. (This will account for differing price variabilities) A box spread is an options trading strategy.
Regarding spreads, a representative may tell a customer that they: A) may not be less risky than simple long or short positions B) are always less risky than simple long or short positions C) involve no risk because the investor is both long and short D) are always more risky than simple long or short positions
A) may not be less risky than simple long or short positions - Because it is possible for both legs of a spread to move against a customer, a spread is not safer than a simple long or short position. The CFTC requires that this be disclosed in a risk disclosure statement.
A long futures position in a commodity that was established on a certain exchange may be offset by selling the same futures on : A) the same commodity exchange B) any CFTC-regulated commodity exchange C) any other exchange trading that commodity D) any commodity exchange
A) the same commodity exchange - To liquidate a long futures position, one must sell the same futures contract originally purchased. The contract sold must be the same commodity and delivery month on the same exchange. Selling the same commodity on a different exchange does not liquidate the original position, it creates an inter-market spread.
Another term for cash trading, is typically a privately negotiated agreement between a buyer and a seller to deliver a specified quantity and quality of a good at a time and place to which both parties have agreed.
Actuals, or physical teading.
Your customer is long 2 gold Aug futures and short 2 gold Dec futures on the COMEX (each contract is 100 troy oz). The basis at the beginning is -3.75; on offset of the positions, it is +1.15. What is the gain or loss? A) $520 gain B) $980 gain C) $520 loss D) $980 loss
B) $980 gain - Your customer is long the near and short the far. The difference changes from -3.75 to +1.15 for a gain of 4.90 × 2 positions = 9.80.
An investor purchases four mini-soybean futures contracts at $1.47 on the CBOT (1000 bu). He offsets at $1.61 a contract, his margin was 25 cents per bu, and commission was $20 per contract. What was his net gain as a percent of his investment? A) 44% B) 48% C) 54% D) 56%
B) 48% - The investor makes 14 cents per contract or $140. Subtracting $20 commission equals $120 per contract. Margin is $250 per contract ($120 / $250 = 48%).ROR = (profit or loss − commissions) / margin of investment
A mayonnaise manufacturer hedges the risk of increase in the costs of ingredients with : A) a short hedge in soybean oil B) a long hedge in eggs C) a short hedge in eggs D) any of these
B) a long hedge in eggs - To protect against price increases, the manufacturer should establish a long hedge in his input (eggs).
The use of soybean oil futures to protect an inventory of cottonseed oil is called a : A) reverse processing spread B) cross hedge C) long hedge D) processing spread
B) cross hedge - A cross hedge involves hedging an asset or a futures position with a similar but different contract.
Your customer is long 6 S&P 500 Jun futures and short 6 S&P 500 Dec futures (one point equals $250). Initially, the Jun is at a 1.45 discount to the Dec. Upon offsetting both contracts, the discount narrows to .55. This represents a : A) loss of $450 B) gain of $1,350 C) loss of $1,350 D) gain of $450
B) gain of $1,350 - A customer who is long the near and short the distant contract in a normal stock index futures market wants the spread to narrow. Your customer has a gain of .90 × 250 × 6 contracts, or $1,350.
A customer has both a regulated futures account and a securities account at a member firm. The customer receives a margin call in the securities account and there is excess equity in the regulated futures account. In this case, the member firm may: A) make the transfer only after obtaining written consent from the trader each time a transfer is to be made B) make the transfer if the customer has signed a funds transfer (supplemental) agreement authorizing the firm to transfer money from the regulated futures account to the securities account C) transfer the money from the regulated futures account to the securities account-unless otherwise instructed by the trader D) not transfer money from the regulated futures account to the securities account even upon the customer's request
B) make the transfer if the customer has signed a funds transfer (supplemental) agreement authorizing the firm to transfer money from the regulated futures account to the securities account - The customer must sign the supplemental agreement allowing transfers between accounts; verbal permission does not authorize the transfer.
A thin market in any particular exchange involves: A) better opportunity for profit B) risk being unable to offset at a fair price because of low liquidity C) rising open interest D) less chance for unfavorable delivery
B) risk being unable to offset at a fair price because of low liquidity - A thin market involves the risk of low liquidity-not enough buyers or sellers to offset positions.
In which of the following circumstances are carrying charges not important? A. Copper B. Live hogs C. Cotton D. Sugar
B. Live hogs. EXPLAINED: The easiest way to determine this answer is to notice that only one of these choices is 'alive'. Hogs and cattle are not stored; they are raised.
What is Basis and what is the formula for it?
Basis is the price difference between the local cash price of a commodity and the price of a specific futures contract of the same commodity at any given time. Basis = cash - futures
is used to ascertain the best time to buy or sell, when to hedge, or the futures month in which to place a hedge and more.
Basis.
In August, a plywood dealer places an order with a miller for shipment in March. If both the dealer and the miller hedge by taking positions in June futures, which of the following statements is TRUE? A) In August, the miller should buy Jun futures and sell cash lumber (a selling hedge). He should sell his Jun futures in March and buy cash lumber. B) In August, the miller should buy Jun futures and sell cash lumber (a buying hedge). He should sell his Jun futures in March and buy cash lumber. C) In August, the lumber dealer should buy Jun futures and sell cash lumber (a buying hedge). He should sell his Jun futures in March and buy cash lumber. D) In August, the lumber dealer should buy Jun futures and sell cash lumber (a selling hedge). He should sell his Jun futures in March and buy cash lumber.
C) In August, the lumber dealer should buy Jun futures and sell cash lumber (a buying hedge). He should sell his Jun futures in March and buy cash lumber. - The dealer should hedge a future purchase with a buying hedge.
An inventory of 500,000 pounds of electrolytic copper is hedged with which of the following transactions? (25,000 pounds per contract): A) Buying 33 futures contracts B) Buying 20 futures contracts C) Selling 20 futures contracts D) Selling 33 futures contracts
C) Selling 20 futures contracts 500,000 pounds divided by 25,000 pounds = 20 contracts. <br> <br>To hedge, the business sells 20 copper futures contracts. Because the hedger is long the actuals, he hedges by shorting futures. The cash position size divided by the contract size equals the number of contracts needed to hedge.
A buy hedge is most likely used by: A) an elevator to protect its inventory B) a farmer to protect his crop C) a refiner to protect his operating costs D) none of these
C) a refiner to protect his operating costs - A refiner risks that his input costs will rise. A long hedger makes a substitute purchase in the futures market to protect against a price rise that adversely affects a later cash transaction.
A futures market hedge is: A) established only by speculators B) established only when prices are expected to move in the profit direction of the hedge (e.g., down if the hedge is a short futures position) C) a temporary substitute for a later sale of the cash commodity D) placed in the nearby commodity futures contract
C) a temporary substitute for a later sale of the cash commodity - If a hedger plans to sell the cash commodity later, he protects his risk by selling futures. The short futures operates as a temporary sale of his cash position. Hedges protect the risk that prices will change between today and when a cash transaction will occur. Hedges can be placed regardless of whether the hedger expects an adverse price move (prices are never assured). Typically, the hedge is placed in a futures contract that becomes deliverable approximately when the hedger's cash transaction will occur.
A hedger is short the basis when he or she: A) speculates that futures prices will decrease B) recognizes that prices are low and establishes a long futures hedge to protect against a subsequent price rise C) has sold the cash commodity, but has no inventory, and therefore places a long futures hedge D) converts futures into the cash commodity through an exchange for physicals transaction
C) has sold the cash commodity, but has no inventory, and therefore places a long futures hedge - A hedger who is short the basis wants futures prices to rise relative to cash prices (decreasing basis). This reflects the attitude of a long hedger who sold cash forward and must protect a later cash purchase by going long futures. A long hedger is long futures, short cash, and short the basis (and wants a weakening basis).
A grain broker contracted to deliver cash grain at a specified price would hedge by: A) selling cash grain B) purchasing cash grain C) purchasing grain futures D) selling grain futures
C) purchasing grain futures - Assuming the broker does not have the grain that he contracted to sell, he seeks upside protection. Buying the futures will offset loss he may incur from higher grain prices.
A cattle feeder is least likely to hedge using the following: A) short live cattle futures B) long corn futures C) short feeder cattle futures D) long soybean meal futures
C) short feeder cattle futures - A cattle feeder hedges feed cost by going long corn or soybean meal futures. The selling price of the fattened cattle (output) is protected by going short live cattle futures. The feeder would hedge the cost of acquiring the cattle to be fattened (input) by going long feeder cattle futures.
Which of the following is NOT part of carrying charges? A. Storage B. Insurance C. Transportation D. Interest
C. Transportation. EXPLAINED: Cost to transport a commodity to a designated delivery point vary widely by location. Costs of holding (carrying) inventory include the cost of leasing storage space, insurance costs against spoilage, and interest charges on funds borrowed to hold the inventory. All of these costs are now reasonably consistent.
The price of a futures contact is determined by ... A. the NFA B. the CFTC C. open bids and offers on the exchange D. prearranged agreements between the floor brokers`
C. open bids and offers on the exchange. EXPLAINED: Futures prices are established on futures exchanges.
Is the contract market for butter, wood pulp, live cattle, and lean hogs, as well as financial instruments, foreign currencies, and equity futures, among other things.
CME. The Chicago Mercantile Exchange Group. 'The Merc'.
A government bond trader selling U.S. Treasury bonds to a bank is making what type of transaction?
Cash Market Transaction
What is convergence?
Cash prices and Futures prices tend to converge and are equal (basis of 0) at expiration of the futures contract.
What type of basis is used in grain markets?
Country basis, or local basis. It refers to the local cash market price compared with nearby futures price (nearby month).
Why is hedge margin lower than speculative margin? A) Hedgers are institutional customers. B) Hedging is accomplished with relatively few contracts. C) Hedgers require more liquidity because of their cash positions. D) Opposite cash and futures positions involve less risk than net long and net short positions.
D) Opposite cash and futures positions involve less risk than net long and net short positions. - Hedgers generally retain basis risk, not the (greater) risk of net market positions.
If a Nigerian businessman sells cocoa to Great Britain, to protect himself from risk due to the shifting value of the pound, he will: A) go short dollar futures and long pound futures B) do nothing C) go long pound futures D) go short pound futures
D) go short pound futures - The exporter hedges by selling (short) pound futures. He has a long cash position in pounds and will be paid in pounds; he is concerned about the value of the pound falling and sells pound futures to hedge his risk. He protects his risk with a futures position that appreciates as the market moves against his (long) cash position.
A long hedge operates as a . . . ? A) speculation B) substitute sale C) collateralization D) substitute purchase
D) substitute purchase - A long hedge is placed to lock in a purchase price. Current low prices can be enjoyed by going long (buying) futures as a temporary substitute for a later cash transaction. If prices subsequently rise, the gain on the futures offsets the higher cost of the cash purchase.
Forward contracts differ from futures contracts in that... A. They are non-standardized B. They are regulated by the CFTC C. Their prices are not set in the competitive market D. All of the above
D. All of the above.
Size, grades, and delivery locations of futures contacts are set by ... A. the NFA B. The CFTC C. The U.S. Department of Agriculture D. the exchange where the contract is traded.
D. the exchange where the contract was traded. EXPLAINED: The exchange set the standards and enforce all terms and conditions of all futures contracts traded on their platforms.
With the approach of delivery on the futures, the price difference between cash and futures often ... ?
Decreases, or converges.
Money in the customer's account in excess of the initial margin requirements to open positions is called ... ?
Excess margin. Excess margin can be withdrawn or used as margin to establish additional positions. Excess margin can come from additional deposits by the customer or profits on open positions.
Fundamentally, there is no difference between commodities spot and futures prices True or False?
False. EXPLAINED: Although both prices respond to similar influences, a cash price values a specific lot of a commodity at a specific place (the spot) and time; a futures price values a standardized (rather than specific) quantity and quality of a commodity for future delivery at a designated point.
In general, an elevator operator who purchases grain and hedges plans to deliver the grain on each futures contract he sells. True or False?
False. - Delivering against a futures contract requires the short to bear the cost of delivery (transportation to the designated delivery point, inspection and grading, transshipping, etc.). Generally, it is simpler and less expensive to sell in a local cash transaction.
A speculator's motive is often hedging. True or False?
False. - Speculators assume the price risk that hedgers avoid, for the chance to profit from favorable price changes.
You would be considered a bona fide hedger if you were a manufacturer of chocolate candy and you sold cocoa futures. True or False?
False. - As a candy manufacturer, you must buy cocoa as an input into your production process. To be a bona fide hedger, a candy producer must be long cocoa futures to hedge a later cash purchase of cocoa.
Speculators add volatility to the market. True or False?
False. - Speculators provide liquidity to the marketplace which tends to aid hedgers and reduce volatility.
What are some examples of Hedgers?
Farmers Ranchers Producers Exporters and Importers
What is usually the largest portion of carrying charges?
Financing costs. EXPLAINED: It is always assumed that the money necessary to buy and hold the cash commodity is borrowed. Even if the money is not borrowed, there is cost to use it, as the user loses the opportunity to use the money in other ventures/investments. The borrowing cost used when calculating carrying charges is the prime rate.
The process of discounting stocks or bonds by a certain percentage to determine their value as margin collateral is known as:
Haircutting. - Securities receive a haircut (reduction in value) when pledged as collateral for margin. Bucketing and churning are both violations of regulations.
What are the two major groups in the futures market?
Hedgers and Speculators.
What is hedging>
Hedging is using a futures contract (or futures option) to reduce risk that you normally would have in relation to a particular commodity. EXPLAINED: Hedgers look to protect - to either protect crops against a decline in value or, as as a buyer, insulate from significant rise in prices. Futures may be used to hedge the risk in both of these situations.
is the minimum amount needed to pen, or establish, a futures position.
Initial margin.
When cash prices are higher than futures prices, the market is said to be ... ?
Inverted. An inverted market reflects a premium basis.
What is a Hedger?
Is a person participating in the physical commodity market who also holds positions in futures and/or options in order to be protected from the risk of unfavorable price movements.
To offset a long futures position, a trader must...
Liquidate the purchase of a (long) futures contract by selling an equal number of contracts of the same delivery month on the same exchange.. EXPLAINED: Liquidating a long position offsets an open futures position. Tp liquidate a long position, a customer must sell the same contract he is long; to liquidate a short position, a customer must but the contract he is short.
What are some examples of commodities that are NOT storable and don't have carrying charges apply?
Live hogs and live or feeder cattle.
A buyer of a futures contract is called ... ?
Long. EXPLAINED: Buy is synonymous with being long. Selling is being short. This is true for futures and options as well as stocks and bonds.
? . . . is the minimum amount of money that must be present in a commodity contract at all times.
Maintenance margin
. . . ? is the additional margin that the customer has to deposit into the account if the market moves against him.
Maintenance margin. * Both initial and maintenance margin requirements may change while a customer's position is open.
How are margin requirements on futures different from margin requirements on securities?
Margin requirements are not a straight percentage (e.g. 50% in stocks) of the commodity contract value but instead are a predetermined dollar amount (e.g. $1,320 per live cattle contract)
A futures market is inverted when ...
Near delivery months sell at a premium to more distant delivery months. EXPLAINED: An inverted market is when the price of the nearby futures contact is higher than the price of the deferred (distant) futures contract, caused by short supply. Simply put, it is when the cash price is higher than the futures price.
The efficiency of a futures market is primarily determined by the ...?
Number of active traders. EXPLAINED: Market efficiency depends on how well prices reflect available information. The greater the number of active participants, the more efficient the market.
A long position in a futures contract is considered an _____ in the future, not an option.
Obligation.
Quality adjustments may not be made for ...
Soybean oil deliveries. * Only one standard-grade of soybean oil is eligible for delivery, and the grade must be acceptable following inspection by a member of the American Oil Chemists Society.
These grades are enforced by the specific exchanges that standardize and enforce terms and conditions of all commodity future contracts traded.
The Standard Grade, or also called the Basis Grade.
What is 'Spot Price' ?
The price of a commodity for immediate delivery.
True or False? The CFTC may designate more than one exchange as a contract market for a particular commodity.
True.
True or False? The clearing house guarantees financial performance but not the delivery of the physical commodity for all outstanding contracts.
True.
Although a spread position may carry less risk of loss than an outright long or short position, this does not mean potential losses on spreads are more controllable or that spreads are safer. True or False?
True. - Both sides of a spread can move against the spreader, producing substantial losses.
Generally, margin requirements increase as volatility in a futures market increases. True or False?
True. - Margin requirements generally increase as markets become more volatile.
Hedging requires less margin security than speculative positions because it is easier for the futures broker/dealer to ascertain the financial condition and responsibility of the hedge customer. True or False?
True. - Margin requirements on bona fide hedges as well as spreads are less than those set for speculative futures positions. Hedgers are required to sign a hedge account agreement in which they state that all trades in their account will be hedges. A hedger enters into a position in the futures market opposite to positions held in the cash market to limit losses; or who purchases or sells futures as a temporary substitute for a cash transaction that will occur sometime later.
Speculators provide liquidity. True or False?
True. - More participation by speculators (or anyone for that matter) provides more liquidity. Greater liquidity is a consequence of speculator involvement, but that is not why speculators trade.
The speculator's motive is profit. True or False?
True. - Speculators assume the same price risk that hedgers avoid, for the chance to profit from favorable price changes.
The clearinghouse guarantees fulfillment and economic integrity of futures contracts. True or False?
True. - The term "fulfillment" can mean "performance", which the clearinghouse guarantees. The clearinghouse does not guarantee delivery.
Producers can hedge the sale price of feeder cattle by selling feeder cattle futures contracts. True or False?
True. - To implement a short hedge, feeder cattle producers short enough feeder cattle futures contracts to cover the feeder cattle to be produced. Conversely, the sale price of feeder cattle cannot be hedged by selling live cattle futures. Live or fat cattle are the output of a feedlot, while feeder cattle heifers (young and not yet bearing) are its input.
On many commodity exchanges, hedgers have a lower original margin requirement than speculators. True or False?
True. - Trade margins (hedging margins) are usually lower because of hedgers' cash and futures positions. Because hedgers face only basis risk rather than price risk, they may deposit a smaller amount of margin.
A futures contract is legally binding, but it does not always require the original buyer or seller to take or make delivery. True or False?
True. EXPLAINED: An open long position or short futures position is an obligation to take or make delivery of thw actual commodity if the position is held until thew contract's delivery date. Most contracts are offset (closed) prior to delivery.
The margin requirements for speculative long positions and short positions are generally the same. True or False?
True. - Margin is determined by whether the position is speculative or a hedge. Margin is not based on whether the position is long or short.
What are some examples of commodities that are storable and deliverable, which carrying charges would apply?
Wheat, corn, cotton, coffee, gold and copper. EXPLAINED: Other commodities, such as sugar or foreign currencies, do not fall neatly into a specific category and must be investigated individually and are not testable. In normal market conditions, cash prices on actuals are lower than nearby futures prices.
When do arbitrage opportunities exist/present themselves for an investor?
When the cash and futures price difference exceeds carrying charges. EXPLAINED: By buying the nearby contract and simultaneously selling a distant contract at a price that exceeds carrying charges, the arbitrageur profits as prices return to their normal relationship
A strengthening basis occurs when the cash market . . .
When the cash market [rices increases relative to the futures prices. Or in other words, the difference between cash and futures prices narrows.
If the margin prescribed by the exchange or brokerage firm in the position falls to or below a pre-specified level (the maintenance level), what will happen?
a call for additional funds will be made in order to restore the account back up to the initial margin level. * These funds are due the next business day.
is someone who owns or deals in a commodity and hedges (protects) its future sales price by selling futures.
a short hedger. EXPLAINED: In other words, a short hedger is long the spot and short the futures.
Who does a strengthening basis benefit?
a strengthening basis benefits the short hedger (a selling hedge).
Who benefits from a weakening basis?
a weakening basis benefits a long hedger. (a buying hedge). EXPLAINED: a long hedger is someone who will ned to buy a commodity in the future and hedges (protects) its future cost by buying futures. In other words, a long hedge is short the spot and long the futures.
When does a weakening basis occur?
a weakening basis occurs when either cash market prices increase more slowly than futures prices or cash prices decrease more quickly than futures prices. In other words, the basis becomes more negative or less positive.
When futures contract prices equal or exceed the cash price PLUS carrying charges, it is know as a ... ?
carrying charge market or Contango market.
The kind of trade that involves immediate exchange of ownership of a commodity or good for an agreed-upon amount of money
cash trade
Since margin in commodities is solely a performance guarantee, there are no ... ?
margin interest costs as there is no true possession of the underlying commodity.
A strengthening basis occurs when ... ?
occurs when the cash market prices increases relative to the futures prices. In other words, the difference between cash and futures prices narrows.
a normal futures market occurs when ... ?
occurs when the price of nearby futures contract is lower than the price of the deferred (distant) contract. EXPLAINED: In other words, a futures market in which the distant months are selling at a premium to the nearby months. A normal market reflects a discount basis, because cash prices are lower than future prices.
Efficient markets typically..
reduce price volatility and increase liquidity.
When spot prices are higher than the futures prices, this may be caused by ... ?
short supplies. EXPLAINED: Short (or tight) supply pushes spot prices higher than futures prices. Premium basis reflects that the current supply of the physical commodity is tight.
What does CBOT stand for and what is it the contract market for?
the Chicago Board of Trade. It is the contract market for soybean, Treasury bond, and ethanol futures.
What does COMEX mean/stand for and what is it the contract market for?
the Commodity Exchange Incorporated (a division of NYMEX). It is the contract market for precious metals futures such as gold, platinum, and palladium
What does NYM stand for and what is it the contract market for?
the New York Mercantile Exchange (part of CME Group) It is the contract market for energy futures such as crude oil, propane, electricity, and uranium, as well as copper, silver, gold, platinum, and palladium.
The NYSE Liffe is the contract market for ... ?
the U.S. dollar/euro, Rapeseed, and Robusta Coffee, among other things.
In efficient markets, commodities futures contracts trade at a price that includes ... ?
the cash price PLUS the carrying charge.
