Minimum Price Contract
What It Is:
A minimum price contract is a futures contract with a price floor.
How It Works/Example:
A minimum price contract has a provision that places a lower limit on the price of a futures contract's underlying asset. For example, a minimum price contract on gold may state that regardless of market price movements, the buyer may not pay the seller less than $800 per ounce.
Why It Matters:
Minimum price contracts protect the seller from losses due to erratic price behavior at the time the contract expires.
7 Most Popular Related Terms
Facebook Comments:
Cached on May 24, 2012, 1:33 am