SAFE agreements are a relatively new type of investment created by Y Combinator in 2013. These agreements are concluded between a company and an investor and create potential future equity in the company for the investor in exchange for immediate liquidity for the company. Safe converts into equity in a subsequent funding round, but only if a particular triggering event (described in the agreement) occurs. Futures contracts can be traded on a purely profit-making basis as long as trading is concluded before expiration. Many futures contracts expire on the third Friday of the month, but contracts vary, so check the contract specifications of all contracts before trading them. The profit or loss of the position varies in the account as the price of the futures contract changes. If the loss becomes too large, the broker will ask the trader to deposit more money to cover the loss. This is called the maintenance margin. Suppose you are interested in trading the DAX, which has a current purchase price of $US 10,700.
You think that if the market breaks the price level of 10,750 $US, it will continue to rise, so decide to use a futures contract to buy at 10,750 $US in two months. Futures contracts are standardized to specify the quality and quantity of the underlying asset. When a trader buys a futures contract, he undertakes to buy the underlying at the agreed price when the futures contract expires. And if a trader sells a futures contract, he would be required to sell the asset on the expiry date at the agreed price. Futures markets are regulated by the Commodity Futures Trading Commission (CFTC). The CFTC is a federal agency created by Congress in 1974 to ensure price integrity in the futures market, including the prevention of abusive business practices, fraud, and the regulation of brokerage firms active in futures trading. Storage costs, dividends, dividends and commodity yields. Assuming one-year oil futures are $78 a barrel. By entering into this contract, the producer is required to supply one million barrels of oil within a year and will receive $78 million.
The price of 78 $US per barrel will be obtained regardless of where the spot market prices are located on that date. Futures contracts are standardized, unlike futures contracts. Forwards are similar types of agreements that set a future price at the moment, but forwards are traded over-the-counter (OTC) and have customizable terms that are taken between counterparties. In contrast, futures contracts have the same terms, regardless of the counterparty. If the DAX was trading at US$10,770 at the expiration date, you could execute your futures contract to buy at the agreed price of $10,750 and get a profit. But if the market had fallen or never reached the level of 10,750 $US, you would still have to pay the agreed amount and you would suffer a loss. To understand what a SAFE is, it is important to know what it is not. It is not a debt instrument. Nor are they common shares or convertible bonds.
However, SAFE`s convertible bonds are similar, as they can both provide equity to the investor in a future preferential share cycle and contain valuation caps or discounts. However, unlike convertible bonds, no interest is outstanding and has no specific maturity date and, in fact, they may never be triggered to convert the SAFE into equity. . . .