Futures margin mechanics | Finance & Capital Markets | Khan Academy

Understanding the mechanics of margin for futures. Initial and maintenance margin.Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/derivative-securities/forward-futures-contracts/v/verifying-hedge-with-futures-margin-mechanics?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/derivative-securities/forward-futures-contracts/v/motivation-for-the-futures-exchange?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: In many commodities markets, it is very helpful for buyers or sellers to lock-in future prices. This is what both forwards and futures allow for. This tutorial explains how they work and what the difference is between the two. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Comments

1. What about variation margin????? Unbelievable!
2. Oh my god thank you. I've been staring at my text book stupidly for 1 hour and i couldn't understand anything. I wish i had watched your video sooner.
3. Doesn't this defeat the whole purpose of the forward contract? Seems you are still in the hands of a changing market 
4. In addition to that, it seems like the buyer is still paying $200 to the seller in each case.
5. Like it ... sO corlorful!!
6. Wow. THANKS!!!!
7. Thanks for the great videos, they really help me a lot. I must admit though that I had some problems with this one. I really don't see what the whole margin system is good for. You are saying that, if the market price drops, the buyer will not want to keep his end of the contract, but after all he has entered into a legally binding contract, which obliges him to pay right? If, when the market price goes down, the contract changes, then what is the point of engaging in it in the first place?
8. I watched it twice, just because i was so excited.
9. HA I WAS SO CONFUSED BUT NOW I AM NOT CONFUSED
10. @hossamrida he uses Smoothdraw
11. @Kavir1618 he uses paint
12. What is the name of the program that you are using? it seems pretty handy a thing.
13. Okay, so it makes sense that a drop in the price will actually benefit the seller and hurt the buyer of a futures contract, but how does this contract protect the two parties from price changes? Could you do a side-by-side example of two parties entering this contract versus two parties subject to the market? Because I don't really see the difference.
14. @N4RVS This is a channel dedicated to providing free education for the world on a wide variety of subjects.