Palladium Futures Price
The palladium futures price is different than the palladium price in the cash (physical)
market. Generally, the price of a commodity for future delivery is higher than the cash price due to carrying costs (insurance,
interest, and warehousing fees). This is called contango. The opposite of contango is backwardation. Backwardation is when
the price of a commodity for future delivery is lower than the cash price Backwardation is normal in a “seller’s
market.”
When you trade palladium futures, your futures price depends on
where you get into the market. After you post your initial margin, your profit or loss depends on where you enter and exit
the market (minus transaction costs).
For example:
The contract size for palladium is 100 troy ounces. So each $1 move equals $100. As the market moves
your account value adjusts. If your account value drops below the maintenance margin a margin call is due. A margin call can
be met by offsetting positions or adding money to your account.
Palladium commodity futures contract trading can be both
highly profitable and extremely risky because of leverage. Leverage is the ability to control a large quantity of a commodity
for a very modest investment. That investment is called margin. Be certain you understand the risk of trading futures on margin
before you consider opening a palladium trading account.
Trading
futures is like driving a car without insurance. You save the insurance premium, but if you crash you will wish that you were
insured. If you have very deep pockets or deal with the physical palladium product then futures may be for you. If you are
a speculator with a limited amount of risk capital then palladium options are a better way for you to invest in the palladium
market.
