In this hypothetical example and with hypothetical prices for the
year 2010, you have bought a futures contract for crude oil for $25 a
barrel and you have instructed your broker to sell your futures
contract if prices either decline to $20 for a loss or rise to $30
for a profit, whichever happens first. If the market rises to
$30 a barrel before it drops to $20 you will make $5 a barrel profit.
You bought your hypothetical contract at $25 a barrel and you sold
your hypothetical contract at $30 a barrel for a profit of $5 a
barrel. How much money you make in total will depend on the size of
the contract you are trading. If the contract size is 1000 barrels,
you will make $5,000. If the contract size is 100 barrels, you will
make $500. This does not take into consideration any commission you
will have to pay for the transaction. In the futures markets,
contract sizes for wheat, corn, gold, cattle, stock indices,
currencies, and all other future contracts are set and established by
the exchanges where they are traded and any futures broker will be
able to give you the current contract sizes for any futures or
options contract that you might interested in.
