|
Once a closing bell signals the end of a
day's trading, the exchange's clearing
organization matches each purchase made that
day with its corresponding sale and tallies
each member firm's gains or losses based on
that day's price changes--a massive
undertaking considering that nearly
two-thirds of a million futures contracts
are bought and sold on an average day. Each
firm, in turn, calculates the gains and
losses for each of its customers having
futures contracts.
Gains and losses on futures contracts are not only
calculated on a daily basis, they are credited and deducted
on a daily basis. Thus, if a speculator were to have, say, a
$300 profit as a result of the day's price changes, that
amount would be immediately credited to his brokerage
account and, unless required for other purposes, could be
withdrawn. On the other hand, if the day's price changes had
resulted in a $300 loss, his account would be immediately
debited for that amount.
The process just described is known as a daily cash
settlement and is an important feature of futures trading.
As will be seen when we discuss margin requirements, it is
also the reason a customer who incurs a loss on a futures
position may be called on to deposit additional funds to his
account.
Next:
What is a Futures Contract?
|
