Selling (Going Short) Lead Futures to Profit from a Fall in Lead Prices

If you are bearish on lead, you can profit from a fall in lead price by taking up a short position in the lead futures market. You can do so by selling (shorting) one or more lead futures contracts at a futures exchange.

Example: Short Lead Futures Trade

You decide to go short one near-month LME Lead Futures contract at the price of USD 1,145/ton. Since each Lead futures contract represents 25 tonnes of lead, the value of the contract is USD 28,625. To enter the short futures position, you have to put up an initial margin of USD 5,500.

A week later, the price of lead falls and correspondingly, the price of LME Lead futures drops to USD 1,031 per tonne. Each contract is now worth only USD 25,763. So by closing out your futures position now, you can exit your short position in Lead Futures with a profit of USD 2,863.

Short Lead Futures Strategy: Sell HIGH, Buy LOW
SELL 25 tonnes of lead at USD 1,145/tonUSD 28,625
BUY 25 tonnes of lead at USD 1,031/tonUSD 25,763
ProfitUSD 2,863
Investment (Initial Margin)USD 5,500
Return on Investment52%

Margin Requirements & Leverage

In the examples shown above, although lead prices have moved by only 10%, the ROI generated is 0%. This leverage is made possible by the relatively low margin (approximately 19%) required to control a large amount of lead represented by each contract.

Leverage is a double edged weapon. The above examples only depict positive scenarios whereby the market is favorable towards you. If the market turn against you, you will be required to top up your account to meet the margin requirements in order for your futures position to remain open.

Learn More About Lead Futures & Options Trading

Ready to Start Trading Futures?

Trade futures now at OptionsHouse.com with special low introductory contract rates!

To buy or sell futures, you need a broker that can handle futures trades.

OptionsHouse is a full fledged Futures Commission Merchant that provides a streamlined access to the futures markets at extremely reasonable contract rates.

Click here to open a futures trading account at OptionsHouse.com now!



Follow Us on Facebook to Get Daily Strategies & Tips!

Lead Options & Futures

Futures Basics

Metal Futures

Options Strategy Finder

Outlook on Underlying:


Profit Potential:


Loss Potential:


Credit/Debit:


No. Legs:


Join the Discussions @ The Options Forum

Beginners Questions

Advanced Strategy Talks

RSS Feed Widget

Trading Ideas & Opportunities




Home | About Us | Terms of Use | Disclaimer | Privacy Policy | Sitemap

Copyright 2016. TheOptionsGuide.com - All Rights Reserved.