Corn futures are traded electronically on the Globex platform at 5,000 bushels per contract from 8:00 p.m. U.S. ET to 2:20 p.m. U.S. ET the next day. To trade corn futures, you’ll need a futures account that has been approved.
The Asset on the CME
Corn futures are traded on the Chicago Board of Trade in the United States (CBOT). Corn is denoted by the symbol ZC, and one contract of corn is worth 5,000 bushels. Ticks with a minimum size of 1/4 cent per bushel are worth $12.50 per contract.
Corn futures, as previously stated, are a favorite investment choice for speculators and aggressive traders due to their proclivity for large price swings. Now consider how these price changes might be reflected in a trading position.
Corn Futures Contract Specs Calculation
Assume the front-month corn contract is now trading at $4.50/bushel and moves up five cents. In terms of a single normal corn futures contract, the value of the price shift is as follows:
- A one-cent change in a full-size corn futures contract (5,000 bushels) is equal to $50.
- 20% of the complete contract (or $10) for a micro-size corn futures contract (1,000 bushels).
0.05 cents per bushel multiplied by 5,000 bushels is $250 As a result, a five-cent change in maize is equivalent to a $250 change in a single conventional futures contract.
$600 = $0.12 5,000 bushels In terms of a single typical futures contract, a twelve-cent shift in corn would amount to a $600 move.
We can see that a one-cent change in corn is comparable to $50 if we break this estimate down further. You can calculate how much the value of a futures contract has increased or reduced by multiplying $50 per contract by the price change in cents. Furthermore, you should now be able to determine the profit or loss associated with your position.
Mini Corn Contracts
There are also corn micro contracts that can be traded. A single micro corn contract is worth $1,000 bushels, or 20% of the total contract value.
It stands to reason that the tick value of the small corn contract would be 1/5 that of the standardized contract. In the mini-corn contract, a one-cent price change would be equivalent to $10 in the conventional one.
Contract Values
The real contract value in your portfolio is equally as significant as the tick values. With a few easy calculations, here’s a quick way to figure it out:
Let’s take the previous example of corn trading at $4.50 a bushel and see what a standard futures contract would be worth in this situation.
To figure it out, multiply the market price of corn per bushel by the number of bushels in the contract. At the very least, when we have many contracts.
We would multiply $4.50 (price per bushel) * 5,000 (bushels per contract) 1 in our example (number of contracts). As a result, the contract is worth $22,500. In other words, a single regular corn futures contract worth $4.50 is worth $22 500.
Mini Corn Futures
So, how much is a single tiny corn futures contract worth? We know it’s worth 20% of the standard one’s value, and since it’s trading at the same $4.50/bushel price, we can calculate it using the following formula:
Market Price per bushel 1,000 x the number of contracts = Mini Corn Contract Value
Using the above inputs, a single small corn contract has a value of $4,500 for $4.50. (4.50 x 1,000 x 1).
What will the cost of future contracts be?
How much does trading futures cost? Futures and options on futures contracts have a cost of $2.25 per contract, plus exchange and regulatory fees. Exchange fees may vary depending on the exchange and the goods. The National Futures Association (NFA) charges regulatory fees, which are presently $0.02 per contract.
Is a futures contract costly?
- A futures contract is a financial derivative that locks in today’s price for an underlying asset that will be delivered later.
- These contracts are marginable, which means that a trader just needs to put up a part of the trade’s total notional value, known as the initial margin.
- If the price of the underlying declines, the trader will need to put up additional money (known as maintenance margin) to keep the deal open.
1 corn futures contract equals how many bushels?
SPECIFICATIONS FOR CONTRACTS Each futures contract shall be for 5,000 bushels of No. 2 yellow corn at par, No. 1 yellow corn at 11/2 cents per bushel over contract price, or No. 2 yellow corn at par plus 1 1/2 cents per bushel over contract price.
What is the purpose of futures contracts?
A futures contract is a legally enforceable agreement to acquire or sell a standardized asset at a defined price at a future date. Futures contracts are exchanged electronically on exchanges like the CME Group, which is the world’s largest futures exchange.
What is the cost of an S&P 500 futures contract?
The base market contract for S&P 500 futures trading is the standard-sized contract. It is valued by increasing the value of the S&P 500 by $250. For example, if the S&P 500 is at 2,500, a futures contract’s market value is 2,500 x $250 (or $625,000).
To trade micro futures, how much money do you need?
The Micro E-mini S&P 500 and the micro-sized Dow are expected to require roughly $660 in margin to trade, $836 for the Micro E-mini NASDAQ-100 futures contract, and less than $500 for the “petite” Russell 2000.
You’re asking the appropriate questions if you’re curious about the contract size and margin. The contract size is determined by the index price, just like any other index future. By multiplying the point value by the current price, the value may be calculated. Thus, if the S&P 500 is trading at 2,850, the Micro E-mini futures contract would represent $14,250 worth of an S&P 500 allocated portfolio of stocks ($5 x 2,850); similarly, if the NASDAQ Micro E-mini futures contract is trading at 7800 (7,800 x $2), the notional value of a NASDAQ Micro E-mini futures contract would be $15,600; and the Micro E-mini Dow futures contract would represent $13,000 worth
For futures, how much margin do you require?
Futures margin is typically 3-12 percent of the notional value of the contract, compared to up to 50 percent of the face value of securities acquired on margin.
Is it possible to trade futures without using leverage?
Trading in futures is, as we all know, quite similar to trading in the cash market. Futures, on the other hand, are leveraged because they merely require a margin payment. If the price change goes against you, however, you will have to pay mark to market (MTM) margins. Trading futures presents a significant difficulty in terms of minimizing leverage risk. What are the dangers of investing in futures rather than cash? What’s more, what are the risks of trading in the futures market? Is it possible to utilize efficient day trading futures strategies? Here are six key techniques to limit the danger of using leverage in futures trading.
Avoid using leverage just for the sake of using it. What exactly do we mean when we say this? Assume you have a savings account with a balance of Rs.2.50 lakhs. You want to invest the funds in SBI stocks. In the cash market, you can buy roughly 1000 shares at the current market price of Rs.250. Your broker, on the other hand, claims that you can purchase more SBI if you buy futures and pay a margin. Should you invest in futures with a notional value of Rs.2.50 lakh or futures with a margin of Rs.2.50 lakh? You can acquire the equivalent of 5000 shares of SBI if you buy it with a margin of Rs.2.5 lakh. That implies your profits could rise fivefold, but your losses could also rise fivefold. What is a middle-of-the-road strategy?
That brings us to the second phase, which is deciding how many SBI futures to buy. Because your available capital is Rs.2.50 lakh, you’ll need to account for mark-to-market margins as well. Let’s say you predict the shares of SBI to have a 30% corpus risk in the worst-case scenario. That means you’ll need Rs.75,000 set aside solely for MTM margins. If you want to roll over the futures for a longer length of time, you must throw in a monthly rollover cost of approximately 1%. So, if you wish to extend your loan for another six months, you’ll have to pay an additional Rs.15,000 to do so. Additional Rs.10,000 can be provided for exceptional volatility margins. Effectively, you should set aside Rs.1 lakh and spend only Rs.1.50 lakhs as an initial margin allowance. That would be a better way to go about calculating your initial margins.
You can hedge your futures position by adding a put or call option, depending on whether you’re holding futures of volatile equities or expecting market volatility to rise dramatically. You may ensure that your MTM risk on futures is largely offset by earnings on the options hedge this manner. Remember that buying options has a sunk cost, which you should consider carefully after considering the strategy’s risks and rewards.
Use rigorous stop losses while trading futures. This is a fundamental rule in any trading activity, but it will ensure that you exit losing positions quickly. Is it feasible that the stock will finally meet my target after I set the stop loss? That is entirely feasible. However, as a futures trader, your primary goal is to keep your money safe. Simply exit your position when the stop loss is triggered. That’s because if you don’t employ a stop loss, you’ll end up losing money.
At regular intervals, book profits on your futures position. Why are we doing this? It ensures that your liquidity is preserved, and it adds to your corpus each time you book gains. This means you’ll be able to get more leverage out of the market. Because you’re in a leveraged position, it’s just as crucial to keep your trading losses to a minimum as it is to maintain your trading winnings to a minimum.
Last but not least, keep your exposure from becoming too concentrated. If all of your futures positions are in rate-sensitive industries, a rate hike by the RBI could have a boomerang impact on your trading positions. To ensure that the impact of unfavorable news flows does not become too prohibitive, it is always advisable to spread out your leveraged positions. It has an average angle as well. When we buy futures and the price of the futures drops, we usually average our positions. Again, this is risky since you risk overexposure to a certain business or theme.
Leverage is an integral aspect of futures trading. How you manage the risk of leverage in futures is entirely up to you.