Future price and value on 1 contract? - futures io
futures io



Future price and value on 1 contract?


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one fxSOL with 3 posts (2 thanks)
    2. looks_two Massive l with 2 posts (3 thanks)
    3. looks_3 bobwest with 1 posts (3 thanks)
    4. looks_4 Plankton with 1 posts (1 thanks)
      Best Posters
    1. looks_one kevinkdog with 4 thanks per post
    2. looks_two bobwest with 3 thanks per post
    3. looks_3 Massive l with 1.5 thanks per post
    4. looks_4 fxSOL with 0.7 thanks per post
    1. trending_up 670 views
    2. thumb_up 14 thanks given
    3. group 4 followers
    1. forum 8 posts
    2. attach_file 0 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 125,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

Future price and value on 1 contract?

(login for full post details)
  #1 (permalink)
fxSOL
Belgrade Serbia
 
 
Posts: 39 since Mar 2020
Thanks: 21 given, 16 received

Now trying to do some calculations because I heard by accident a guy speaking on his cellphone regarding a trade on gold futures.
Lets say he said 500 contracts of gold futures (gc). How much money is needed to actually buy 500 contracts of gold futures without leverage?

500 X "gold-price" ? Current price is 1819, so it should be 1819 * 500 = 909500 usd

But this can not be correct? Since 1 contract gold future is 100 oz gold and 1819 is price for 1 oz?

(1819* 100) * 500 = 90950000 usd

Is this correct?

Reply With Quote

Can you help answer these questions
from other members on futures io?
What are the main Eurobond futures and their respective …
Traders Hideout
Does anyone have the code for Anchored Vwap to use in Qu …
Traders Hideout
Google Keyword Search Alerts
Traders Hideout
 
Best Threads (Most Thanked)
in the last 7 days on futures io
Vinny E-Mini & Algobox Review TRADE ROOM
46 thanks
Design a DayTrader Scalping Order Flow Indicator
22 thanks
Daytrading.Coach Review
11 thanks
AMA: FuturesTrader71 (FT71) / Morad Askar - Ask Me Anything
9 thanks
The Wheel Strategy on Options
9 thanks
 
(login for full post details)
  #2 (permalink)
 Massive l 
Legendary /NQ Trader
OR/USA
 
Experience: None
 
Massive l's Avatar
 
Posts: 2,129 since Mar 2011
Thanks: 1,857 given, 5,071 received

Looks correct to me. That's a lot of contracts...

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Massive l for this post:
 
(login for full post details)
  #3 (permalink)
fxSOL
Belgrade Serbia
 
 
Posts: 39 since Mar 2020
Thanks: 21 given, 16 received



Massive l View Post
Looks correct to me. That's a lot of contracts...

Looks like someone has a pretty large wallet then...unbelievable!

Reply With Quote
 
(login for full post details)
  #4 (permalink)
 bobwest 
Site Moderator
Sarasota FL
 
Experience: Advanced
Platform: Sierra Chart
Trading: ES, YM
 
bobwest's Avatar
 
Posts: 7,020 since Jan 2013
Thanks: 51,534 given, 23,343 received


fxSOL View Post
Now trying to do some calculations because I heard by accident a guy speaking on his cellphone regarding a trade on gold futures.
Lets say he said 500 contracts of gold futures (gc). How much money is needed to actually buy 500 contracts of gold futures without leverage?

500 X "gold-price" ? Current price is 1819, so it should be 1819 * 500 = 909500 usd

But this can not be correct? Since 1 contract gold future is 100 oz gold and 1819 is price for 1 oz?

(1819* 100) * 500 = 90950000 usd

Is this correct?

Well, actually, no.

When you are long a futures contract, you did not actually buy any gold, or anything else for that matter. You enter into a contract to buy a specified amount of gold at a specified date. The margin you put up to be in the contract is in the nature of a security deposit or earnest money. It is required so that, when the position is marked to market at the end of every day, if the price has gone down, you have enough cash in your account to be able to cover the difference. That's it.

You can have any amount of margin you like in the account, so long as it meets the exchange minimum for an overnight trade, or the broker's minimum for a day trade.

So when does the price of gold come in? At settlement, of course, which is when you have to actually come up with the full amount of the purchase, and this will be a very large amount (which is why brokers will just routinely close you out before settlement, if you have not declared that you will settle, and put up the full amount to do so.) That's the only time that you actually pay for, and receive, any gold.

No one trades gold or anything else on the futures market using that kind of money. The thing to understand is that a futures contract is not an asset you are buying. It is a contract to buy at a later date, which is when you will need the purchase price.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
Reply With Quote
The following 3 users say Thank You to bobwest for this post:
 
(login for full post details)
  #5 (permalink)
 kevinkdog   is a Vendor
 
 
Posts: 3,126 since Jul 2012
Thanks: 1,665 given, 6,206 received

Gold at CME right now requires $8,250 in initial margin, $7500 in maintenance margin.

So, if this guy really had 500 contracts, he would need at least $3,750,000 in his account to hold the position overnight. And that is the bare minimum.

Each tick in gold (0.1 movement) would make/lose $5000.

Gold normally moves around 20 points per day on average (today was 35 points). A 20 point move is $1,000,000 in a day.

Follow me on Twitter Reply With Quote
The following 4 users say Thank You to kevinkdog for this post:
 
(login for full post details)
  #6 (permalink)
 Massive l 
Legendary /NQ Trader
OR/USA
 
Experience: None
 
Massive l's Avatar
 
Posts: 2,129 since Mar 2011
Thanks: 1,857 given, 5,071 received


bobwest View Post
Well, actually, no.

When you are long a futures contract, you did not actually buy any gold, or anything else for that matter. You enter into a contract to buy a specified amount of gold at a specified date. The margin you put up to be in the contract is in the nature of a security deposit or earnest money. It is required so that, when the position is marked to market at the end of every day, if the price has gone down, you have enough cash in your account to be able to cover the difference. That's it.

You can have any amount of margin you like in the account, so long as it meets the exchange minimum for an overnight trade, or the broker's minimum for a day trade.

So when does the price of gold come in? At settlement, of course, which is when you have to actually come up with the full amount of the purchase, and this will be a very large amount (which is why brokers will just routinely close you out before settlement, if you have not declared that you will settle, and put up the full amount to do so.) That's the only time that you actually pay for, and receive, any gold.

No one trades gold or anything else on the futures market using that kind of money. The thing to understand is that a futures contract is not an asset you are buying. It is a contract to buy at a later date, which is when you will need the purchase price.

Bob.

I understood his question as asking how much money would it cost if futures wasn't on margin.

Visit my futures io Trade Journal Reply With Quote
The following 2 users say Thank You to Massive l for this post:
 
(login for full post details)
  #7 (permalink)
fxSOL
Belgrade Serbia
 
 
Posts: 39 since Mar 2020
Thanks: 21 given, 16 received


Massive l View Post
I understood his question as asking how much money would it cost if futures wasn't on margin.

Indeed I did mister!

Reply With Quote
The following 2 users say Thank You to fxSOL for this post:
 
(login for full post details)
  #8 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,352 since Dec 2013
Thanks: 3,688 given, 8,752 received


fxSOL View Post
Since 1 contract gold future is 100 oz gold and 1819 is price for 1 oz?

(1819* 100) * 500 = 90950000 usd

Is this correct?

If gold was $1819/oz then yes 500 contracts would be approximately $91M NOTIONAL VALUE.


kevinkdog View Post
Gold at CME right now requires $8,250 in initial margin, $7500 in maintenance margin.

So, if this guy really had 500 contracts, he would need at least $3,750,000 in his account to hold the position overnight. And that is the bare minimum.

Agree with Kevin, the margin requirement for 500 contracts would be around $4M or barely 4% of the Notional Amount giving you approximately 20:1 leverage!

While everybody is thinking, "WOW that's a massive order" and "massive amounts of money", if you are working on an institutional trading desk something like that could easily be just another day in the office. Hedge funds regularly call up institutional market makers and get prices on very large orders like this. Producers are often hedging production with orders that have an extremely high notional value. Back when I was trading crude on an institutional desk the standard size for a Calendar Year Swap was 25000 bbls/month of 300,000 bbls for the year. That's like trading 300 CL futures in one trade. It wasn't rare for an oil producer to ask us for a price for 100,000 bbl/month on a 2 year or 3 year swap. That would be 2400-3600 contracts in a single trade. I know that's an oil example not a gold one but I suspect gold works similarly.

Reply With Quote
The following user says Thank You to SMCJB for this post:
 
(login for full post details)
  #9 (permalink)
 Plankton 
Blacksburg, SC
 
Experience: Beginner
Platform: NinjaTrader
 
Posts: 17 since Aug 2019
Thanks: 31 given, 27 received


bobwest View Post
Well, actually, no.

When you are long a futures contract, you did not actually buy any gold, or anything else for that matter. You enter into a contract to buy a specified amount of gold at a specified date. The margin you put up to be in the contract is in the nature of a security deposit or earnest money. It is required so that, when the position is marked to market at the end of every day, if the price has gone down, you have enough cash in your account to be able to cover the difference. That's it.

You can have any amount of margin you like in the account, so long as it meets the exchange minimum for an overnight trade, or the broker's minimum for a day trade.

So when does the price of gold come in? At settlement, of course, which is when you have to actually come up with the full amount of the purchase, and this will be a very large amount (which is why brokers will just routinely close you out before settlement, if you have not declared that you will settle, and put up the full amount to do so.) That's the only time that you actually pay for, and receive, any gold.

No one trades gold or anything else on the futures market using that kind of money. The thing to understand is that a futures contract is not an asset you are buying. It is a contract to buy at a later date, which is when you will need the purchase price.

Bob.

Excellent explanation Bob! Even I understood that. Which is amazing. LOL!

Reply With Quote
The following user says Thank You to Plankton for this post:


futures io Trading Community Traders Hideout > Future price and value on 1 contract?


Last Updated on November 14, 2021


Upcoming Webinars and Events
 

NinjaTrader Indicator Challenge!

Ongoing
     



Copyright © 2021 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada), info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts