Think: The contract IS the option. The investments you make in the futures market are actually contracts. You aren't buying an asset outright, like what happens in the stock market when you buy a share of some company. Instead, in futures trading, someone has given you the right to either buy or sell a set amount of some asset (shares of stock or barrels of oil or whatever) at a certain set price by a certain date.
An assignable contract allows you to transfer the contract to the third party (or to put it another way, you can assign it to someone else). This allows you to sell the contract to someone else if it becomes more valuable, rather than waiting to complete the transaction yourself. Not all futures contracts are assignable, however.
Assignable contracts are like making a bet on the Kentucky Derby, seeing your horse get out to a big lead, and then selling your betting slip to someone else while the race is still being run. You are eliminating the risk that your horse might trip and end up losing the race. You are also eliminating the hassle involved with cashing in the winning bet if the horse ends up winning.
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Finance: What is a Commitment Letter?5 Views
Finance a la shmoop what is a commitment letter? dear Rebecca it's been fun and
all but asking me to move in with you was a real turnoff so uh have a nice [Rebecca reading letter]
life yeah that would be a fear of commitment letter I know that one well
well so what's a commitment letter then all right well you need dough but you
don't need it today you need it in six months when construction is finished on
your cabin by the lake at that point you'll convert your very expensive
building loan into a normal mortgage well you can go to the bank and for a [Man walks into bank]
small ish fee get a commitment letter from them which stipulates that assuming
nothing material changes between now and then you will in fact then get a loan
for one hundred fifty two thousand dollars at 5 percent fixed interest rate
for 30 years the bank is then committed to giving you that loan when you know [Contract stamped with committed]
eventually you need it that way you don't have to worry about your bank you
know breaking up with you which is nice because it's tough getting
the It's not you it's me speech from a guy in a bowtie [Man wearing bow tie talking to a man in the bank]
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