Trading loss example
Based on current market conditions, an individual believes the price of crude oil will remain stable. They see the current price of crude at $100.00, with an event contract based on whether the price of Crude futures will settle above $101.00 at 12:30 p.m. CT.
Believing that it will not close at a price over $101.00, they select “No.” Based on the current market, the trade costs $52.50, which they will pay in full at the time of execution. If their view is correct, they will receive a $100.00 payout for a profit on the trade of $47.50.
At 1:30 p.m. CT, Crude futures settle at a price of $110.00 dollars. The trade is not profitable, but they were able to participate in a market they found interesting, knowing their risk was limited to the $52.50 paid for the trade.
For more information, visit cmegroup.com/eventcontracts.
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