Session 11 — Futures for Rookies
Gold & Silver • Oct 18, 2025 standard margins

Step 0 — Know your contract (specs first)

How a futures contract works (plain English)
  • You agree on a price per ounce today for a standard amount (the contract size).
  • Each day your account is settled by mark‑to‑market: gain/loss = price change × size × #contracts.
  • You must post initial margin; if equity drops below maintenance, you get a margin call.
  • Tick is the smallest price step; each tick has a fixed $ value (tick × size).
Tip: Beginners use micros to keep dollars small. We’ll size that for you in Step 2.

Step 1 — Why futures? (and the danger)

Why:
  • Lock a price (hedging).
  • Use small cash to control big value (capital efficient).
  • Trade nearly 24h on major contracts.
Danger:
  • Leverage magnifies gains and losses.
  • Daily mark‑to‑market → margin calls.
  • Overnight gaps can skip stops.
Tip: Beginners start with micros (MGC for gold, SIL for silver) and risk ≤1% per idea.

Step 2 — Plan: Risk → Stop → Size (we auto-pick micros)

Do these 3 things only:
  1. Type your Account balance and Risk% (we suggest 1% for rookies).
  2. Pick a Stop Distance (how far price can move before your idea is wrong).
  3. We auto-calculate Contracts (micros), your P/L per $1, Notional, and Leverage. Copy the order line below.
—
Contracts—how many to trade
P/L per $1—per $1 price move
Notional—price × size × #
Leverage—notional / equity

🛡️ Margin Gate (Oct 18, 2025 standard)

You must have Initial Margin per contract to open, and keep equity above Maintenance to hold overnight. We cap contracts automatically if your equity can’t cover initial.
GC (100 oz)
$19,800 / $18,000initial / maintenance
MGC (10 oz)
$1,650 / $1,500initial / maintenance
SI (5,000 oz)
$19,250 / $17,500initial / maintenance
SIL (1,000 oz)
$3,520 / $3,200initial / maintenance
Status: —
Implied per-contract margin as % of notional at your entry: —% (initial), —% (maintenance).
Note: Some brokers require more than exchange minimums (e.g., initial = 125% of maintenance). “Day-trade margins” are intraday only; overnight must meet full initial.
How we calculate (open me)
  • Risk Budget ($) = Account × Risk%
  • Risk per contract ($) = Stop Distance × Contract Size
  • Contracts (micros) = ⌊ Risk Budget / Risk per contract ⌋
  • P/L per $1 move = Contract Size × #Contracts
  • Notional = Entry × Contract Size × #Contracts
  • Leverage (×) = Notional / Account
Example (MGC, $10,000 account, 1% risk = $100, $10 stop at $4,200): Risk/ct = $10 × 10 oz = $100 → 1 micro. P/L per $1 = $10. Notional = 4,200 × 10 × 1 = $42,000 → Leverage ≈ 4.2×.
Contract sizes: GC=100 oz, MGC=10 oz, SI=5,000 oz, SIL=1,000 oz. Tick example: GC tick $0.10 → $10; MGC tick $0.10 → $1.

Step 3 — Simulator (price & account cash)

Margin-call distance—
Calls—
Top-ups wired—
Final cash—
P&L—
How it works (simple):
  • We build a daily price path (you pick the scenario).
  • Each day: P/L = ΔPrice × size × contracts × (±1).
  • We check equity vs maintenance margin. If below → margin call.
Price
Account cash
Log






P/L Math — Day by Day


Formula we use each day: P/L = ΔPrice × Contract Size × #Contracts × ( +1 long / −1 short )








Explain: Squeeze • Margin Call • Mark‑to‑Market • Calendar





What is a squeeze?

    

  • Fast move against crowded traders (e.g., shorts forced to buy back).
    • 

  • Often around news or thin liquidity. Can gap over stops.
    • 


What to do if squeezed?

    

  • Trade small (micros). Respect the stop. Do not add to losers.
    • 

  • If short overnight, consider buying a small call to cap tail risk.
    • 






What is a margin call?

    

  • Daily mark‑to‑market loss makes equity < maintenance.
    • 

  • Broker asks you to wire funds to restore to initial margin.
    • 


Choices at a call:

    

  • Reduce/exit to cut risk (pro default), or
    • 

  • Wire only if plan is still valid and size stays small.
    • 








Mark‑to‑market (M2M) means gains/losses are settled in cash daily. That’s why futures can margin‑call even if you never “close” the trade.
      



Calendar & Catalysts (CPI, Fed, Jobs, holidays): higher gap risk → start smaller, use hard stops, avoid thin hours.
      




What should I do now? (based on this run)


    

    

    


    

    Step 5 — Resources & Exchanges
    

    
Useful websites (start here)


    

    

    Major commodity futures exchanges
    

    

    
CME Group (COMEX/NYMEX/CBOT)
    
Region: U.S. • Focus: Metals, Energy, Ag, FX.
    
Flagship: GC/MGC, SI/SIL, CL/MCL, ZC, 6E/M6E.
    
cmegroup.com

    

    
ICE Futures (U.S./Europe)
    
Region: U.S., U.K./EU • Focus: Softs & Energy.
    
Flagship: KC, CC, SB, BRN.
    
theice.com

    

    
LME — London Metal Exchange
    
Region: U.K. • Focus: Base metals.
    
lme.com

    

    
Eurex
    
Region: EU • Focus: Rates, equity index; some commodities via partners.
    
eurex.com

    

    
JPX/TOCOM
    
Region: Japan • Focus: Precious metals, rubber, oil.
    
jpx.co.jp

    

    
SGX — Singapore Exchange
    
Region: Asia • Focus: Iron ore, freight, petrochems.
    
sgx.com

    

    
China: SHFE, DCE, ZCE (access varies).
    
SHFE •
            DCE •
            ZCE

    

    
MCX — Multi Commodity Exchange (India)
    
Region: India • Focus: Metals, energy, agri.
    
mcxindia.com

    

    

    

    


    

    Step 6 — Case Studies — Airline • Jeweler • Exporter
    

    
        Real-life hedging examples. Each block is editable; numbers auto-recalculate.
      
    

    

    ✈️ Airline — Jet Fuel Cross-Hedge (via HO)
    

    

    
            Airline is exposed to rising fuel costs. Jet fuel futures can be thin → use ULSD/HO as a proxy and scale by h*.
            
    Formula: h* = ρ × (σjet / σHO)
    

    

    




    

    




    

    

    

    HO contract size: 42,000 gal
    

    h*: 0.76 • Gallons hedged: 1,400,000
    

    # HO contracts (long): ~25 • Direction: Long futures to offset rising fuel costs.
    

    

    

    

    💍 Jeweler — Inventory Hedge (Gold)
    

    

    Short gold futures to hedge downside on inventory held in ounces.
    

    




    

    



    

    

    

    # Futures (short): ~2 GC
    

    P/L inventory = Δ×oz: -20,000 • P/L futures (short) = -Δ×(contracts×size): +20,000
    

    Hedged net P/L (ignores basis/fees): ≈ 0
    

    

    

    

    🌍 Exporter — EUR Receipts in 3 months
    

    

    
            U.S. exporter expects euro receipts; fears stronger USD (EURUSD↓). Hedge by short Euro FX futures (6E).
          
    

    




    

    



    

    

    

    # 6E (short): ~40
    

    Futures P/L (short) per contract ≈ −Δ × size; total: +255,000
    

    Exporter USD receipts ≈ EUR × new rate = 5,150,000
    

    Sign check: If EURUSD falls, short 6E tends to gain in USD terms.
    

    

    

    




    

    Step 7 — Homework & Quiz
    

    
Homework prompt (bring 1 page):

      

    1. Pros & cons: Compare futures trading in Gold/Silver vs owning physical metal.
            Consider: leverage, liquidity, costs/fees, storage/insurance, slippage, tracking error, hours, roll/notice dates, tax treatment*, tail/gap risk.
      2. 

    2. Conclusion: Pick a use case (short-term speculator, long-term hedger, jeweler) and explain which approach fits and why.
      3. 

    
*Not tax advice — check official resources in your country.

    

    

     
    
 

    



    
  
    Mini-Debate — Hedge for the Rest of the Year? (pick ONE only)
    

  
    
    Goal: Work on one role/product only. Give a plain-English YES/NO about using a simple futures hedge for the rest of the year, plus one short reason.
  
    

  
    Pick ONE role only
    
  
      
    
    • Airline — jet fuel (diesel/HO proxy)
      • 
    
    • Baker — wheat (CBOT wheat)
      • 
    
    • Jeweler — gold (COMEX gold)
      • 
    
    • Soybean farmer — soybeans (CBOT soybeans)
      • 
    
    • Silver miner — silver (COMEX silver)
      • 
  
    

  
    What to hand in (max 2 lines)
    
  
      
    
    1. Decision (YES/NO): Hedge with simple futures for the rest of this year?
      2. 
    
    2. Why (one sentence): e.g., “We need cost certainty” or “We can live with price swings.”
      3. 
  
    

  
    Grading (10 pts)
    
  
      
    
    • Clarity — 5 pts: a clear YES or NO.
      • 
    
    • Reason — 5 pts: one sensible, plain-English sentence.
      • 
  
    

    





    

    Quiz
    
Open Session 11 Quiz
Opens in a new tab/window.