Conversion of future prices to spot prices

CFA Level I Derivatives
#1

Hi
I want to ask if there is a conversion of spot and future prices …what about the fixed future price …if I enter now in a contract to be long on x for 50 and the spot price and future prices at expiration are at 40 so what about the obligation to buy x …I buy future contract for 40 to buy x at 50 when the spot is 40 …I’m really confused

Thanks

#2

I think that you mean “convergence”, not “conversion”.

I believe that I answered this question in the other thread in which you posted it.

#3

Thanks for ur help …I need to know is there a difference between the excersise price which is fixed and the price of future contract as it seems they Are different because the future price must converge to the spot price at expiration which can’t be happen when the price is fixed

#4

There is no “exercise” price on a futures contract, because futures contracts aren’t exercised. Options are exercised, because the owner gets to decide whether or not to do so. There’s no such choice on a futures contract; both parties are obligated to perform: one to pay (the long) and one to deliver the underlying (the short).

I went through an example of what is meant by the futures price converging to the spot price in the other thread in which you asked this question: Derivatives future and spot prices - #2 by S2000magician