Gold Futures Trading

Written by Kathleen Gagne
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Like other commodities, gold futures trading can be handled by most brokers. They are usually traded in US dollars,and you will find that a significant portion of gold market trading is in futures. Huge fortunes can be made and lost trading or speculating in futures. Most futures trades involve everyday items such as food products, precious metals like gold, or currency. They can also include pure gold, rare coins, or silver pieces.

Futures contract trading is done for a fixed broker commission per contract. These commissions range from around $25 to $100. If you wanted to buy or sell a futures contract, you would have to be able to make a margin deposit of around $1,000, or sometimes less.

Gold Futures Options

When you're trading in futures, you can buy a contract or buy an option to buy a contract. This sounds a little complicated, but it's really not. If you wanted to buy a $500,000 futures contract, you would be at risk for the entire amount if the market price dropped. If, however, you only wanted to buy an option to buy the $500,000 contract, you would pay a higher premium for the right to buy the contract in the future.

If the price of gold dropped by 10%, you would only be liable for the premium you paid for the option to buy the contract instead of losing the $50,000 lost in the 10% drop. This would be your total cost for the right to buy the contract at a specific price. If you buy an option on a gold future, you are not obligated to buy the future, so that, if you decide not to buy, again, all you will lose is the option premium.


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