IDIOT'S GUIDE TO FED2
FUTURES CONTRACTS
WHAT HAPPENS NEXT
So you have bought yourself a bunch of futures contracts which you hope will make you rich. What happens next?
Every so often (5-10 minutes or thereabouts) each exchange recalculates the futures price - that is, the price at which it offers futures contracts - using the exchange price for the relevant commodity (the exchange price is somewhere between the buying and selling price):
- If the base price has gone up, the exchange will increase the price per ton for futures contracts in that commodity by the minimum movement figure for the planet (currently set at 1 groat)
- If the price has gone down, the contract price will go down by the minimum movement
- If the price has not changed, the futures contract price will remain the same
If you keep checking the prices for futures in an exchange, you will see them change over time.
This carries on until the end of trading is reached, which is every hour. At this point, the exchange will settle up all outstanding futures contracts. The price of your contract (the cost) is compared to the current futures price of the exchange and the difference is either added to, or subtracted from, your margin - the float that the broker holds for the contract. The value of the contract will be updated accordingly on the futures display, and the new margin amount will also be shown.
If the cumulative changes exceed 5 groats either way before the hour is up, then trading will be suspended on that commodity - nobody will be able to buy any more contracts in the commodity, and the price of your contracts is frozen until the end of the hour.
At any time you can liquidate a futures contract, in which case you get back the margin plus credit for any changes that happened since the last hourly settling up, minus the brokers charge (which is explained below). The command is 'LIQUIDATE commodity'. You must be in the relevant exchange.
The brokers charge is a commission of 5% of the contract's profit, with a minimum charge of 250IG. The profit is calculated by taking the amount of money left in the margin at the time of liquidation, and subtracting 4,000IG - any margin calls made during the life of the contract are ignored.
When the game resets, any outstanding futures contracts will be liquidated, and whatever is left in the margin will be paid back to your bank account. If you are on the game at the time you will be told the results. If you are absent then your brokers will leave a message for you, which you can read next time you log in by typing 'MAIL'.
Obviously, you hope that the margin will be higher than the initial 4,000 ig you laid out when you bought the contract - that's where your profit comes from.
If your margin goes below the minimum allowed, as shown on the 'DI FUTURES' list in an exchange (currently 2,000 ig) then your broker issues a margin call. That means he expects you to pay over the difference, from your bank account.
If the losses on a contract exceed the maximum figures, as shown on the contract display (currently 15,000 groats) then your broker will automatically liquidate it for you - cutting your losses before any more of your groats are wasted!
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