Sugar Futures
Potential return vs. loss example
Here is a closer look into how one Sugar (SB) futures contract turned a $1.1k investment $5,600 as well as how another contract lost traders 100% of their investment.
Sugar (SB) – ICE
~5x return from 8/17/2015 – 9/28/2015.*
Before getting into how this return occurred, it’s important to note the details of this contract.
| Contract Details: | |
|---|---|
| Date opened: August 17, 2015 | Price: $0.10 |
| Expiry Date: September 28, 2015 | Total Value: $11,200 |
| Point Value: 1/1,120 | Initial Margin Requirement: 10% of total value |
| # of Contracts: 100 | |
return
Since Sugar’s price increased from $0.10 to $0.14, the total contract value increased from $11,200 to $15,680 (an increase of $4,480) based on the contract details above. This means the initial investment of $1,120 turned $5,600.
Sugar (SB) – ICE
100% loss from 10/3/2016 – 11/14/2016.*
Before getting into how this loss occurred, it’s important to note the details of this contract.
| Contract Details: | |
|---|---|
| Date opened: October 3, 2016 | Price: $0.23 |
| Expiry Date: November 14, 2016 | Total Value: $25,760 |
| Point Value: 1/1,120 | Initial Margin Requirement: 10% of total value |
| # of Contracts: 100 | |
Since the initial margin for this trade was 10%, and Sugar’s underlying price decreased 10% below its initial purchase price (from $0.23 to $0.207), the initial investment went to $0. Overall, if the underlying price decreases the same amount as the initial margin, the investment will go to $0 (unless you have enough money in your account to keep the trade going). If you do have enough money to keep the trade going, you will risk losing even more than your initial investment.
As you can see in the examples above, futures offer profit potential as well as risk of loss on your investment. If you’re interested in learning how to trade futures, we have free educational resources to help you with that!
Important information
Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures.
TradeStation does not provide investment, legal, or tax advice. This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy.
* Any examples or illustrations provided are hypothetical in nature and provided for demonstration purposes or to illustrate mathematical principals and do not reflect results actually achieved and do not account for risks, fees, expenses, or other important considerations. These types of examples are not meant to predict or project the performance of a specific investment or investment strategy and should never be relied upon when making an investment decision.
