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Calculating a Change in Price

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Category: Commodity

This is just like saying "Copper (HG) 2008 (eight) March (H) at $3.7165/per pound." (It is standard pricing conference to see the prices of futures resembling copper, coffee, sugar and orange juice quoted in cents per pound. In this case, $371.sixty five is the same as $3.7165/pound.) A dealer buys or sells a copper contract in accordance with this type of quotation.

Depending on the quoted value, the value of a commodities contract relies on the current value of the market multiplied by the precise value of the contract itself. On this occasion, the copper contract equals the equivalent of 25,000 pounds multiplied byour hypothetical worth of $371.65.

Commodities are traded based mostly on margin, and the margin adjustments based mostly on market volatility and the current face worth of the contract. To trade a copper contract on NYMEX requires a margin of $7,763, which is roughly 8% of the face value.

Calculating a Change in Price

As a result of commodity contracts are custom-made, every value movement has its personal distinct value. In a copper contract, a .0005 cent transfer is equal to $12.50, and a .01 cent move equal $250. When figuring out copper revenue and loss figures, youcalculate the difference between the contract value and the exit value, after which multiply the result by $12.50. For example, if prices transfer from $371.sixty five to $340.10, you divide the distinction, which is $31.fifty five, by 5 after which multiply the outcome ($631) by $12.50 to yield a contract value change of $7,887.50. 
U.S. Government Required Disclaimer - Commodity Futures Trading Commission

Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. All trades, patterns, charts, systems, etc., discussed in this advertisement and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author and do not necessarily reflect those of the publisher or Tradewins.