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Focus on Futures: Examples

The profit and loss profiles for futures positions are very straightforward.

As with a position in the underlying, if you have bought futures and the price increases, then your profit increases with the price in proportion to the number of contracts you have purchased.

If the price falls, you lose money in proportion with the number of contracts you have purchased.

Shorting the market is just as easy: if you’ve "sold" at a particular futures price then profit increases as the futures price falls. Your aim in this case is to "close out" the trade by buying at a lower price.

If, however, the price of the underlying rises instead of falling, you lose money in proportion with the number of contracts you have sold.


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