Long Futures Lab
Buy to open and sell to close. A long futures position gains when the price rises and loses when the price falls.
Short Futures Lab
Sell to open and buy back the same contract to close. A short futures position gains when the price falls and loses when the price rises.
1. Set up your trade
Choose a direction and open a trade.
2. Reveal the next settlement
3. Check the settlement ledger
Daily P&L = (new settlement − prior settlement) × units per contract × contracts × direction. Use +1 for long and −1 for short. Daily gains and losses flow directly into account equity.
4. Compare the same price shock
Run three separate trades with $5,000 starting equity each. The comparison uses one gold contract, one S&P 500 contract, and three oil contracts. It does not change the trading account above.
Long futures challenge
- Go long one gold contract. Before revealing the next day, calculate your gain if gold rises by $10 per ounce. Use the ledger to check your calculation with the actual simulated move.
- In the Short Futures tab, repeat the gold trade. Compare both ledgers for the same first-day price move.
- Switch to oil and open a long position with three contracts. Advance through Day 3. Calculate the amount that would restore your account to initial margin and compare it with the simulator’s figure.
- In the comparison, explain why a 5% oil drop changes equity by 26.1%. Open the Short Futures tab and explain why the sign reverses.
- A jeweler plans to buy gold next month. An oil producer plans to sell crude. Which direction would each use to hedge, and what happens to each hedge if prices rise?
Prices, margin amounts and headlines are classroom examples. The same market path repeats on reset so you can compare strategies. If equity falls below maintenance margin, this lab closes the position at settlement. The lab allows one open position at a time and omits fees and delivery.
Short futures challenge
- Short one gold contract. Predict the result of a $10 rise per ounce, then reveal Day 1 and check your ledger.
- Reset and short one crude oil contract at $87. At the Day 3 settlement of $78, calculate your cumulative gain and close the position.
- Reset and short four crude oil contracts. Keep the trade open. At the $96 settlement, use the ledger to identify the total loss, ending equity, and the amount needed to restore initial margin.
- Compare the same 5% oil price shock in the Long Futures tab. Explain why the two positions produce opposite gains and losses.
- An oil producer expects to sell oil next month. Explain how short futures can offset some of the loss in sales revenue if prices fall, and why a trader who has no oil to sell might still take the same short position.
These are simulated prices and margin amounts. If equity falls below maintenance margin, the lab closes the position at settlement. The simulation omits fees and delivery.
Session 12 Homework · Can Futures Trading Keep Gold and Silver Prices Low?
Some people argue that large traders in New York and London use derivatives to keep gold and silver prices below where they would otherwise trade. Evaluate that claim using what you learned about futures, short positions, and margin.
In the U.S., COMEX, part of CME Group, lists gold and silver futures. In London, the LBMA Gold Price and LBMA Silver Price are spot benchmarks administered by ICE Benchmark Administration. The 2020 CFTC case concerns conduct by traders in futures markets. Use the sources below to distinguish the trading venue, the benchmark administrator, and the traders.
- Could it happen? Explain how. Describe how spoofing can create a false impression of selling pressure and temporarily affect futures prices. Explain how a move in futures might influence spot prices. How does spoofing differ from a legitimate short sale, such as a mining company hedging future production?
- What does the evidence show? Read the CFTC case and explain what it found. Does the evidence support temporary price distortion, sustained suppression, or both? Describe one pattern in futures and spot prices that would strengthen the sustained-suppression claim and one alternative explanation you would check.
- Could it continue? Give your judgment about whether individual episodes could recur and whether prices could be held down for months or years. Explain how at least two factors, such as arbitrage between spot and futures, physical supply and demand, margin costs, or exchange surveillance, affect your conclusion.
What to submit Write about 300–400 words in your own words. Take a position, explain your reasoning, and cite at least two sources from the list below.