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

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

Example: Short Uranium Futures Trade

You decide to go short one near-month NYMEX Uranium Futures contract at the price of USD 53.00/lb. Since each Uranium futures contract represents 250 pounds of uranium, the value of the contract is USD 13,250. To enter the short futures position, you have to put up an initial margin of USD 1,620.

A week later, the price of uranium falls and correspondingly, the price of NYMEX Uranium futures drops to USD 47.70 per pound. Each contract is now worth only USD 11,925. So by closing out your futures position now, you can exit your short position in Uranium Futures with a profit of USD 1,325.

Margin Requirements & Leverage

In the examples shown above, although uranium prices have moved by only 10%, the ROI generated is 0.00%. This leverage is made possible by the relatively low margin (approximately 12.23%) required to control a large amount of uranium 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 Uranium Futures & Options Trading

• Uranium Futures Basics
• Buying Uranium Futures to Profit from a Rise in Uranium Prices
• Hedging Against Rising Uranium Prices with Uranium Futures
• Hedging Against Falling Uranium Prices with Uranium Futures

You May Also Like

Continue Reading...

Buying Straddles into Earnings

Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors had expected great results....[Read on...]

Writing Puts to Purchase Stocks

If you are very bullish on a particular stock for the long term and is looking to purchase the stock but feels that it is slightly overvalued at the moment, then you may want to consider writing put options on the stock as a means to acquire it at a discount....[Read on...]

What are Binary Options and How to Trade Them?

Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time.....[Read on...]

Investing in Growth Stocks using LEAPS® options

If you are investing the Peter Lynch style, trying to predict the next multi-bagger, then you would want to find out more about LEAPS® and why I consider them to be a great option for investing in the next Microsoft®.... [Read on...]

Effect of Dividends on Option Pricing

Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date....[Read on...]

Bull Call Spread: An Alternative to the Covered Call

As an alternative to writing covered calls, one can enter a bull call spread for a similar profit potential but with significantly less capital requirement. In place of holding the underlying stock in the covered call strategy, the alternative....[Read on...]

Dividend Capture using Covered Calls

Some stocks pay generous dividends every quarter. You qualify for the dividend if you are holding on the shares before the ex-dividend date....[Read on...]

Leverage using Calls, Not Margin Calls

To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk. A most common way to do that is to buy stocks on margin....[Read on...]

Day Trading using Options

Day trading options can be a successful, profitable strategy but there are a couple of things you need to know before you use start using options for day trading.... [Read on...]

What is the Put Call Ratio and How to Use It

Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator.... [Read on...]

Understanding Put-Call Parity

Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in 1969. It states that the premium of a call option implies a certain fair price for the corresponding put option having the same strike price and expiration date, and vice versa.... [Read on...]

Understanding the Greeks

In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions. They are known as "the greeks".... [Read on...]

Valuing Common Stock using Discounted Cash Flow Analysis

Since the value of stock options depends on the price of the underlying stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow.... [Read on...]

Follow Us on Facebook to Get Daily Strategies & Tips!

Uranium Options & Futures

Futures Basics

Energy Futures

Options Strategy Finder

Outlook on Underlying:
Arbitrage Bearish Bullish Neutral - Bearish on Volatility Neutral - Bullish on Volatility

Profit Potential:
Limited Unlimited

Loss Potential:
Limited Unlimited

Credit/Debit:
Credit Debit

No. Legs:
1 2 3 4