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

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.

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

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

(1819* 100) * 500 = 90950000 usd

Is this correct?

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.

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.