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Ontario Grain Farmer Magazine is the flagship publication of Grain Farmers of Ontario and a source of information for our province’s grain farmers. 

Market side: Futures trading basics


Marty Hibbs, Grain Merchandiser, Grain Farmers of Ontario

This monthly educational series will feature the basic workings of the futures and options markets and how they can be utilized to help farmers with risk management.


FUTURES CONTRACTS HAVE a few things in common but they have many important differences. Each and every contract has a contract specification or “spec” sheet. These sheets or tables list the details of each and every contract traded on exchanges around the world.

These characteristics or contract details are critical if you wish to trade in that particular commodity or contract. The most reliable source for contract specs is to go to the website of the exchange that trades that particular contract.

The first item on a spec sheet is the name of the contract. In our example we will use corn. In this case there are two main contracts. One is the daily pit or open outcry session. The symbol for this session is the letter “C”. Any orders placed in this session will trade only during the day session. The second symbol refers to the side by side or electronic session. This session trades almost 24 hours per day and the symbol for this is “ZC”.

The next item in the sheet is the contract size. In the case of corn, the contract size is 5,000 bushels per contract. The sheet will also include grade requirements for that particular commodity. Each contract has a delivery month or expiry date. This is the date at which time all obligations are fulfilled. Either the contract is offset by an opposite position in the market (buy your short positions or sell your long positions) or deliveries are finalized. For our example, we will use the month of September 2015 which is designated by the letter U and the number 5. So far, we have ZCU5.

It is important to note that most contracts have different trading months and trading hours, so this is included on the spec sheet.

Trading units, in this case bushels, and minimum fluctuations are also part of the contract description. In the case of corn, the minimum move allowed on the futures price contract is 1/4 of a cent up or down per bushel. That would equate to 5,000 bushels at 1/4 of a cent or a total price fluctuation of $12.50 U.S. This is necessary to help calculate the profits and losses in a price change on the constantly changing futures markets.

Also important is the first notice day (the day you need to exit your position on the contract if you are long) and the last trading day (which is the day the contract actually expires). Most contracts have daily limits, which means a contract cannot trade above or below the previous close by more than the limit set by the exchange for that day. This is to help reduce panic selling or emptional moves in the market place.

Finally, we will require margin requirements for each commodity. This is a good will deposit on each contract to ensure funds are there to offset losses for a given time period since most contracts require a relatively small deposit compared to the value of the underlying contract.

Contract Name Symbol Units Contract size Min fluctuation Contract months Trading hours Initial margin
Corn ZCU5 Bushels 5,000 bu 1/4 cent or $12.50 H=March
eCBOT Electronic:
6:31 p.m. – 6 a.m.,
9:30 a.m. – 1:15 p.m. CST

We will discuss some of these items in more detail as the need arises, but for now we show below a typical spec sheet for the Chicago corn contract. Next month, we will discuss calculating profits and losses from your futures positions. • •

Marty Hibbs is a 25 year veteran futures trader, analyst, and portfolio manager. Hibbs was a regular guest analyst on BNN for four years. He is currently a grain merchandiser with Grain Farmers of Ontario.

Lesson Definitions:

First Notice Day: First notice day occurs prior to the expiration of the corresponding futures contract. The official definition of first notice day is the day in which the buyer of a futures contract can be called upon by the exchange to take delivery of the underlying commodity. For this reason all speculators will exit their positions before this day and the only participants remaining will be those willing to accept or deliver against their outstanding contracts.


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