第一节算是常识介绍吧~没有特别难的。唯有课后一道题，让自己组合一个bond,两个option……没有做出来，可能还是对各种forward future option不熟悉吧！

chapter2 mechanics of futures markets

This chapter is about how the futures markets work.
The key points: the operation of margin accounts, the difference between future and forward contracts.
2.1 background
the trading process: the computer matches the traders.
future price is decided by the market demand and supply.
2.1.1 close out positions
closing out a position means entering into the opposite position trade to the original one.
delivery arrangements in future contracts is the possibility  of final delivery that ties the future price to the spot price.
2.2 specification of a future contract
it is the party with short position to choose what will happen……
2.2.1 the asset
the commodities with grades……
the financial assets are generally well defined and unambiguous
2.2.2 the contract sizeif the contract size is too large, some investors that plan to speculate in small size cannot get into market;
if the size is too small, the trading cost can be very high.
the specified size of future contract ususally depends on likely users
some exchanges introduced mini contracts to attract investors.
2.2.3 delivery arrangements
the final trading location is related to the price.
2.2.4 delivery months
trades usually cease a few days before the last day on which the delivery can be made.
2.2.5 price quotes
2.2.6 price limits and position limits
the exchange decides the movements limits,which can block speculations
eg limit up limit down limit movements
position limits_also can prevent speculations.

2.3 convergency of futures price to spot price
with time passing by, the future price comes close to the spot price unless there would be an arbitrage opportunity.
2.4 the operations of margins
2.4.1 the daily settlement
the purpose of daily margins is to avoid the contract default.2.3.1 daily settlement
margin account balance,maintenance margin.
At the end of each day, the margin account is adjusted to reflect the investor's gain or loss. and when the balance is lower than the  maintance margin , the investor will be asked to top up the margin account to the initial margin level.
2.4.2 futher details
most brokers pay investors interest for the margin account balance;
Securities(treasury and shares) can also be deposited in the initial margin account;
at the end of each day, the investor's gain or loss is included in the margin account, bringing the value of the contract back to 0. Therefore, a future contract is in effect closed out and rewritten a new price each day.
initial margin account and maintenance margin is decided by the exchange. margin requirements may depend on the objectives of the trader.
2.4.3 the clearing house and clearing margins
the clearing house's task is to keep track of all transactions that happen in one day and calculate the net positions of each member.

2.4.3 the clearing house and clearing margins
the clearing house's task is to keep track of all transactions that happen in one day and calculate the net positions of each member.
The broker is required to maintain a margin account with a clearing house member and the clearing house member is required to maintain a margin account with the clearing house.
The margin account for the clearing house member is adjusted to gains and losses every day.
For clearing house member ,there is a initial margin but no maintenance margin.
In determining the clearing margin, the exchange clearing house calculates the number of outstanding contracts on gross basis or net basis.(gross basis=long positions + short positions; net position= long positions - short position.
2.4.4 credit risk

2.5 otc markets
In case of defaults, the OTC markets have adopted some procedures of exchanges.
2.5.1 collateralization
The payments are a security deposit designed to  ensure the obligation will be honored.
2.5.2 the use of clearing house in OTC market
There are arguments about clearing houses in OTC market for it changes the traditional complex constructions of forwards trading partners and cannot prevent systemic risk.
*systemic risk: the default of one financial institution may cause other financial institutions' failure.

2.6 market quotes



2.6.1 prices
Opening price: the price of first trade
High low
2.6.2 settlement price
the settlement price used for determining profit or loss for the day, as well as margin requirements. The settlement price is the average price at which a contract trades, calculated at both the open and close of each trading day.
2.6.3 change
Change is the changes between today and yesterday's the settlement price .
2.6.4 trading volume and open interest
Trading volume is the number of contracts traded.
Open interest is the number of contracts outstanding .
Trade volumes can be larger than the open interest for most investors who enter into the market during the day close the position before the end of day.
2.6.5 patterns of future prices
Normal market: markets where the future prices is an increasing function of time to maturity.
Inverted market: markets where the future prices is a decreasing function of time to maturity. (spot price>future price)

2.7 delivery
The decision on when to delivery is made by the party with short position.
The party in the long position has to pay for delivery cost such as warehouse cost.
There are 3 key days for the delivery.
For most contracts, the price paid is the most recent settlement price.
2.7.1 cash settlement
The final settlement price is set equal to the spot price of the underlying assets at either the opening or close of trading on that day.

2.8 types of traders and types of orders
Locals: trade on their own account;
FCM: following the instructions of their clients and charge a commission for doing so.

Locals and FCM can be classified into 3 groups: speculators, hedgers and arbitrageurs. The speculators can be classified as scalpers, day traders and position traders.

Scalpers: very short term, hope to get profit from small changes;
Day traders: will not hold position overnight for they do not want to take risks that comes from night news;
Position traders: will hold position for a long time, and want to benefit from changes in long term market.
2.8.1 orders
Limit order: when the price reaches the specified price or more favorable price, the order will be executed.
buy limit: buy the stock only when the price falls below 9$
sell limit: sell or short the stock only when the price goes beyond 11$
Stop order/stop loss order
buy stop: buy the stock only when the price goes beyond 11$
sell stop: sell or short the stock only when the price falls below 9$
Suppose you buy the stock at 10$
1. buy stop loss: close the position only when the price falls below 9$
Suppose you short the stock at 10$
2. sell stop loss: close the position only when the price goes beyond 11$
Stop limit order: suppose the stock is traded at 10$
a buy stop-limit is an order with a stop order at 11$ and limit order at 12$ which means whenever the price goes beyond 11$ but below 12$, the order is activated. It just an activation range.
Market if touched
Market if touched is simple, it is embedded in many stop and limit orders. It means the order is executed whenever the market price is touched. For example, stock is 10$ and you place a 9$ buy limit order, suddenly the market fall to 8$, so you will buy at 8$, if the market instead falls only to 8.99$, you will buy at 8.99$.
Discretionary order: decided by the broker himself.
2.9 regulation
2.10 accounting and tax
2.11 forward and future contracts
2.11.1 profits from forward and future contracts
Future: the gain or loss is realized day by day for daily settlement procedures.
Forward: the gain or loss is realized at the end of period;
2.11.2 foreign exchange quotes
In the future market, prices are quoted as the number of US dollar per unit of foreign currency.  1.2$/euro
In the spot and forward markets, british pound, new zealand dollar, australia dollars are expressed in us dollars. And for other currency, the prices are quoted as the number of foreign currency per unit of us dollars, 1.25rmb/$

要感谢版主大人对buy limit 等的回答~