Buying (Going Long) Oats Futures to Profit from a Rise in Oats Prices

If you are bullish on oats, you can profit from a rise in oats price by taking up a long position in the oats futures market. You can do so by buying (going long) one or more oats futures contracts at a futures exchange.

Example: Long Oats Futures Trade

You decide to go long one near-month CBOT Oats Futures contract at the price of USD 2.0900 per bushel. Since each CBOT Oats Futures contract represents 5000 bushels of oats, the value of the futures contract is USD 10,450. However, instead of paying the full value of the contract, you will only be required to deposit an initial margin of USD 1,350 to open the long futures position.

Assuming that a week later, the price of oats rises and correspondingly, the price of oats futures jumps to USD 2.2990 per bushel. Each contract is now worth USD 11,495. So by selling your futures contract now, you can exit your long position in oats futures with a profit of USD 1,045.

Long Oats Futures Strategy: Buy LOW, Sell HIGH
BUY 5000 bushels of oats at USD 2.0900/buUSD 10,450
SELL 5000 bushels of oats at USD 2.2990/buUSD 11,495
ProfitUSD 1,045
Investment (Initial Margin)USD 1,350
Return on Investment77.4074%

Margin Requirements & Leverage

In the examples shown above, although oats prices have moved by only 10%, the ROI generated is 77.4074%. This leverage is made possible by the relatively low margin (approximately 12.9187%) required to control a large amount of oats 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 Oats Futures & Options Trading

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