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Energy Investing DeMystified : A Self-Teaching Guide by Davis Edwards

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Chapter 6Swaps, Forwards, and Futures

Energy investors can directly speculate on the price of commodities going up or down by purchasing commodity futures, forwards, or commodity swaps.

Futures. A commodity contract traded on an exchange that will involve physical delivery of a commodity if the contract is held until the expiration date. These are highly standardized contracts.

Forward. A forward is similar to a futures contract except that it is negotiated directly between two traders. Because they are individually negotiated, forwards can be more customized than futures. In most cases, forwards are traded for contracts where there is insufficient ...

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