Derivatives in terms of Margin and Expiry of the Contract
Margin and Leverage
Margin means you are buying a thing (not physicaly) in the market but you just supposed to booking a buying contract for you. Then you dont need to pay the ful payment and you will just pay only 1% to 5% or as required by your broker. So if you are going to buy by involving your money upto 5% of the total value of the contract the remaining 95% will be the leverage or in spot Forex you can say thatYou can enjoy the benefits of leverage on contracts up to fifty times your margin deposit. That is, with 1% of the absolute value of contracts, you can enter the largest marketplace in the world. As long as you are able to maintain your margin requirements on the full contract value, you can remain indefinitely in the market.
While other than Spot markets in almost every commodity or currency future contracts are available. The price of future contracts follow the prices of Spot markets cos, Future prices are derived from the Spot prices and normally show a different prices. And these contracts of future or options of the commodities are being stoped on a certain day. Every product have differant scame of time to trade in the exchange like crude oil has 1month contract and other have 3or 4months contract. On the expiry date you have to take the physical delivery of the contract or have to liquidate that position of buying or selling. while reversing a position means that 1stly you was a buyer and you are seller. Like you bought a contract of wheet so reversing means that now you are selling two contracts of wheet. 1 contract to liquidate your buying and 2nd to change your position to make you a seller.