Definition
The term adjusted futures price refers to a value that represents the cash-equivalent of a futures contract. Adjusted futures prices will take into account carrying costs as well as conversion factors.
Explanation
One of the prices an investor will encounter in the futures market is an adjusted futures price for a contract. This value is simply the price of the underlying asset times the conversion factor, which is the number of units of the underlying asset to be delivered. This value is also adjusted for carrying costs as well as the cost to deliver the asset. Effectively, the adjusted futures price is what it would cost a buyer to purchase, finance, and deliver all of the underlying assets specified in the contract.
Related Terms
- The term underlying asset refers to a commodity, financial instrument, or security specified in a derivative contract. The underlying asset is the primary driver of the price paid for a derivative.
Moneyzine EditorSeptember 21st, 2023 - The term transaction cost refers to the charges associated with the execution of a trade and the maintenance of a position. Transaction costs include brokerage commissions, exchange fees, as well as fees levied by the Securities and Exchange Commission.Moneyzine EditorNovember 6th, 2024
- The term trading pit refers to a section of a trading floor that is dedicated to the buying and selling of financial instruments through open outcry. Transactions that are not completed through the trading pit are executed electronically.Moneyzine EditorNovember 6th, 2024
- The term tick size refers to the minimum price increment by which a stock, futures contract, or exchange-traded instrument can increase or decrease. While the tick size for common stock is standardized, it will vary by the underlying asset type in the futures market.Moneyzine EditorNovember 6th, 2024
