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

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

Example: Long Pork Bellies Futures Trade

You decide to go long one near-month CME Frozen Pork Bellies Futures contract at the price of USD 0.8470 per pound. Since each CME Frozen Pork Bellies Futures contract represents 40000 pounds of pork bellies, the value of the futures contract is USD 33,880. However, instead of paying the full value of the contract, you will only be required to deposit an initial margin of USD 1,890 to open the long futures position.

Assuming that a week later, the price of pork bellies rises and correspondingly, the price of pork bellies futures jumps to USD 0.9317 per pound. Each contract is now worth USD 37,268. So by selling your futures contract now, you can exit your long position in pork bellies futures with a profit of USD 3,388.

Long Pork Bellies Futures Strategy: Buy LOW, Sell HIGH
BUY 40000 pounds of pork bellies at USD 0.8470/lbUSD 33,880
SELL 40000 pounds of pork bellies at USD 0.9317/lbUSD 37,268
ProfitUSD 3,388
Investment (Initial Margin)USD 1,890
Return on Investment179.2593%

Margin Requirements & Leverage

In the examples shown above, although pork bellies prices have moved by only 10%, the ROI generated is 179.2593%. This leverage is made possible by the relatively low margin (approximately 5.5785%) required to control a large amount of pork bellies 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 Pork Bellies 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!

Pork Bellies Options & Futures

Futures Basics

Livestock 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.