Ladies and gentlemen, I personally invite you to explore one of our newest and exciting products recently approved by the Federal Government. Folks, with Forecast Contracts, you can take the over and under on economic indicators, financial measures, global temperatures and more thanks to ForecastEx. The exchange matches over and under orders, specifically, Yes and No positions, with a minimal fee of just one penny per collective pairing. That’s right guys and gals. Oh, and by the way, we’re not done with the good news! Investors on both sides receive coupon payments that currently annualize to 4.83%. So even if you lose, you aren’t as upset about an expensive fee on a relative basis and maybe you even feel a little cheerful that despite the wrong call, you collected interest along the way. Finally, if you’re new to the complex nature of Wall Street and the economy, it’s a great learning experience. Given my decade-long experience as a financial economist and academic professor, I will tell you frankly that this is worth your time and effort.
From the ancient days of Aristotle until recent times, derivatives have been a winner takes all game, but the recent creation of Forecast Contracts has changed that shortcoming. For virtually all derivatives, investors who select financial instruments after accurately forecasting developments can score big. However, investors that buy these products may end up losing all of their invested capital, ending up with frowns.
Forecast Contracts address that concern by providing competitive high-yield coupon payments to their holders. These contracts include Yes or No answers to questions about published outcomes related to economic indicators, sovereign debt measures, central bank interest rates, temperatures, etc. Investors who purchase a contract with the correct Yes or No answer receive a payout while both parties receive coupon payments similar to interest, providing an income stream.
This income stream rivals money markets, features no minimums and annualizes at 50 basis points below the mid-point of Fed Funds. Think about it, ladies and gentlemen: When you buy put or call options, cash leaves your account and you surrender interest income in order to take a position. But with this new development, the account holder does not surrender interest income when buying a Yes or a No Forecast Contract. Clients can purchase the contracts through ForecastEx, an IBKR affiliate that operates both a Designated Contract Market and a Derivative Clearing Organization licensed by the CFTC. You can navigate the IBKR Forecast Trader to open and close positions.
While investors that select the correct Yes or No receive a payout, they, along with counterparties that selected an incorrect answer, also receive coupon payments. That way, even investors that select the wrong contract will receive routine payments prior to the agreements settling. The contracts, which entail only a one-cent fee. The combined contract prices of the Yes and No versions total $1 plus the one-cent fee. The price for the Yes and No contracts will depend on the likelihood of the contract being correct. For example, if a Yes contract asks if unemployment will reach a level that is widely anticipated, it will cost more than the No contract. In this case, if the Yes agreement costs $0.65, the No contract will cost $0.36 cents. If the Yes answer is correct, the contract will pay the owner $1 plus the coupon payments while owners of contracts with a No will receive the interest income but no other payout. The interest component is especially attractive for investors looking to pocket coupons over the long-haul, as the exchange offers pairings that settle years from today.
If you have any questions about Forecast Contracts and/or ForecastEx, please do not hesitate to contact me. Here’s the training video on how it works. It’s below 10 minutes in duration and I think it’s worth your time. You’re welcome in advance, I know you’re going to love it.Â
José Torres
Senior Economist, Interactive Brokers
Mobile: 347.860.3095
Email: jtorres@interactivebrokers.com
777 S. Flagler Drive Suite 1001
West Palm Beach, FL 33401
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