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| To buy futures you have to have margin money in an account.
On corn let's use 1700 per contract for round numbers
To buy 10 contracts or 50000 bushels. Your account will need $17000 in it.
But your broker will charge a fee to open the position. Let's say it's $30 per contract. So the account has to have 17300.
Now you are long 10 contracts of corn
If it goes up your account will increase by the amount the corn price went up. Every penny increase is $50 per contract.
Now if corn goes down, you will have to put more money in your account to keep your position. If it drops 5 cents on you day one, you will have a margin call of $2500.
If it goes up 50 cents you will make $25,000 minus the broker fees. 30 in and 30 out per contract.
So in this scenario you made $24,400.
But if it goes down 50 cents you have to come up with 25000 to keep your position live.
Hope this makes sense.
Edited by jimmy 2/9/2024 22:57
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Funds and buying back corn
