Bullion
Selling Gold Contract
A Henyep Gold contract (SPT XAU or SPT GLD) is valued at 100 Ounce (the value of the underlying metal on which it is based). It is quoted with a spread of 70 cents ($0.70), and a minimum fluctuation of $0.05, with a margin requirement $ 2000 per contract.
A client believes that Gold is overvalued and is due to fall in the future. To exploit the situation the client intends to SELL GOLD.
SPT GLD is quoted at 627.90/60. The client sells 7 lots at 627.90. This requires a total deposit of $14,000. The client requires a minimum deposit of $2,000 for each contract./P.
Gold prices fall to 624.20/90. The client reacts to the news by BUYING 7 lots of SPT GLD at 624.90. Therefore it appears that the client has made $3.00 profit per contract. (627.90 - 624.90).
If each contract consists of 100 Ounce (the value of the underlying metal), then we must multiply $3.00 by 100. The profit per contract will therefore be represented in US Dollars as simply: 100*$3.00 = $300 per contract. This results in a total profit of $2,100 ($300* 7 contracts).
The client's gross account balance is now $16,100 ($14,000 original account balance + $2,100 trading profit).
1. Sell 7 lots SPT GLD@ 627.90 - Buy 7 lots SPT GLD@ 624.90
|
+ $3.00 |
| 2. SPT GLD contract = 100* $3.00 |
+ $300 per contract |
| 3. $300 * (Number of lots, 7) |
+ $2,100 (gross profit) |
| *Commission charges are NOT included in the above calculations |
|
Interest adjustments will only be enforced if the client holds positions into future trading days, rather than settling positions (with an equal and opposite position) intra day. |
