Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.
The rough rice futures price is different than the rough rice price in the cash (physical) market. Generally, the price of a commodity for future delivery is higher than the cash price due to carrying costs (insurance, interest, and warehousing fees). This is called contango. The opposite of contango is backwardation. Backwardation is when the price of a commodity for future delivery is lower than the cash price Backwardation is normal in a “seller’s market.”
When you trade rough rice futures, your futures price depends on where you get into the market. After you post your initial margin, your profit or loss depends on where you enter and exit the market (minus transaction costs).
For example:
The contract size for rough rice is 2,000 hundred weight. So each $.01 move equals $20. As the market moves your account value adjusts. If your account value drops below the maintenance margin a margin call is due. A margin call can be met by offsetting positions or adding money to your account.
Trading futures is like driving a car without insurance. You save the insurance premium, but if you crash you will wish that you were insured. If you have very deep pockets or deal with the physical rough rice product then futures may be for you. If you are a speculator with a limited amount of risk capital then rough rice options are a better way for you to invest in the rough rice market.
Rice Futures
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Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Carefully consider the inherent risks of such an investment in light of your financial condition. Past results are not necessarily indicative of future results. Please do your own research before investing in the futures market. This site contains no investment recommendations. The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness.
