Understanding Against Actual Cash Transactions in Futures Markets

Important Keywords: Against actual, Cash transactions, Futures markets, Futures contracts, Options transactions, Commodity trading, Gold futures, Physical delivery, Hedged positions, Price fluctuations.

Introduction:

Against actual is a transaction in the futures market where traders exchange future contracts for cash, without the exchange of physical commodities. It is commonly used by investors looking to close hedged positions.

Understanding Against Actual in a Futures Contract:

1. Definition: Against actual involves trading a cash position for a futures contract on the same commodity without physical exchange.
2. Futures Contracts: Traders can buy or sell commodities or financial instruments at a predetermined price on a specified future date.
3. Options Transactions: Options allow the purchaser the right to sell an asset at an agreed price on a later date.
4. Significance of “Actual”: In futures contracts, “actual” refers to the underlying commodity, with its value influenced by market demand.

Example of Against Actual:

1. Types of Futures Contracts: Stock futures, currency futures, commodity futures, and index futures are common.
2. Gold Futures Contract: A contract specifying the date and amount of gold sale. The seller must fulfill the contract terms by delivering the gold to the buyer.
3. Against Actual Transaction: Instead of physical delivery, the seller promises future delivery but receives payment without transferring the gold.
4. Buyer’s Perspective: The buyer purchases gold at the current market rate without physically receiving it, allowing for potential profit by selling the contract to another buyer.

Key Takeaways:

• Against actual involves cash transactions in futures markets without physical exchange of commodities.
• Futures contracts enable buying or selling commodities or financial instruments for a predetermined price and future date.
• Options transactions provide the right to sell an asset at an agreed price on a later date.
• The term “actual” refers to the underlying commodity in futures contracts.
• Against actual transactions offer flexibility and profit potential without physical possession of the commodity.

Conclusion:

Against actual transactions in the futures market provide a cash-based alternative to physical commodity exchange. Traders can use this method to close hedged positions or benefit from price fluctuations without the need for physical delivery. Understanding against actual is important for investors seeking flexibility in futures trading.

Capital gains (21) CGST (280) Chapter VI-A (15) e-Compliance Portal (21) E-Verify (20) economic growth (19) F&O Trading (29) F.No.354/117/2017-TRU (23) F. No. CBIC-20001/4/2024-GST (15) Financial planning (13) financial stability (16) GST (1458) IGST (223) Income from House Property (17) Income Heads (16) Income Source (14) Income tax (109) Income Tax Account (15) Income Tax Filing (20) Indian context (22) Indian investors (16) ITR-3 (19) ITR Form (20) P&L Statement (24) PAN (13) Risk Management (19) Salary Income (19) Section 7(1) UTGST Act 2017 (14) Section 8(1) UTGST Act 2017 (26) section 9 (18) section 10 (28) section 15 (13) section 25 (17) section 39 (24) section 49 (16) section 50 (16) section 51 (13) Section 52 (16) Section 54 (13) section 73 (21) section 74 (22) SGST (223) Speculative Income (14) Trading Income (33) UTGST (78)