By providing futures contracts that correspond to the spot market, the oil industry can take advantage of futures and basis trades, lock in prices and arrange production, which gives you more control over when to buy and sell goods.
Real-time prices are available through major data providers. Therefore, all participants can understand the price situation in real time during the transaction.
Futures trading offers the possibility of trading in small quantities (multiples of 1,000 barrels), while the spot market has a higher number of standards.
The London Clearing House (LCH) is the other party to the buyer and seller who trades on the London Stock Exchange. This guarantees the financial soundness of each contract of the transaction, including delivery and liquidation.
|Standard trading contract||100 barrels per hand|
|Minimum trading unit||0.1 lot|
|Value/hand of every point||$ 1|
|Trading hours (Beijing time)||
Monday 06:00 to Saturday 05:00, overnight 05:00-06:00 1 hour (daylight saving time)
Monday 07:00 to Saturday 06:00, overnight 06:00-07:00 1 hour off (winter time)
A spot gold contract (SPT_GLD) has a face value of 100 ounces (based on the value of the metal below), with a spread of 50 cents ($0.50), a minimum change of $0.05, and a margin requirement of $1000 per contract.
The customer believes that the valuation of gold is too high and will fall in the future. In response to this situation, the customer decided to sell gold.
The spot gold contract is quoted at 910.90/40 (that is, the quote is 910.90 – 910.40), and the customer sells 7 spot gold contracts at 910.90, which requires a total deposit of $7000. Customers are required to provide a minimum deposit of $1000 per trade.
The spot gold price fell to 907.40/90 and the client decided to close his short-term trade. He bought 7 lots of spot gold at 907.90, then the customer made a profit of $3 per contract in the (910.90 - 907.90) trade.
If the face value of each contract is 100 ounces, we should make a profit of 100*$3. Therefore, the profit per contract in US dollars is: 100*$3=$300, and the total profit is $2100 ($300*7 contracts).
|7-hand spot gold contract selling price 910.90 - purchase price 907.90||+$3|
|1 ounce profit 3 dollars, 100 ounces profit||+$300|
|$300*7 (number of contracts)||$2100 profit|
* The above calculation does not include commission fees