Jim Cramers Real Money Sane Investing In An Insane World

Key Concepts

•  The Development of the Futures Market

•  Forward Contracts versus Futures Contracts

•  Standardization of Contracts

•  Manage Up (Bull), Down (Bear), and Sideways Moving
Markets

•  Discovery of Price Trends

lflBien you buy a futures contract, you agree to be contingently liable for accepting delivery of a specific amount of a specific commodity at a specific time in the future at a specific price. Every futures contract is carefully defined as to size, quality, quantity, delivery location, and delivery date. (See Figure 2.1 and the Appendix.) When you buy a contract, you are considered to be "long" the com­modity. It "be-longs" to you. You own it at a given price.

On a cash commodity basis, when you are long, you have physical possession of the commodity. For example, a farmer with 5,000 bushels of No. 2 corn in a bin on the farm or at a grain elevator is long cash corn.

Rich Dad Poor Dad Robert Kiyosaki

When you sell a futures contract, you contingently agree to de­liver a specific amount of a specific commodity at a specific time in the future at a specific price and location. If you are a seller of a futures contract, you are short. You are currently "short" of the corn

A 5-cent profit was realized. Since 1 cent equals $1,250, a total profit of $6,250 was earned. From this, a brokerage commission and NFA, FCM, and exchange fees would be deducted, or approximately $100.

Buy low, sell high.

You decide to go long the deutsche mark because you believe it is going higher.

Buy 1 June d-mark at 55 cents on the I MM Exchange Sold 1 June d-mark at 60 cents on the I MM Exchange