Platinum Futures Price
The platinum futures price is different than the platinum 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 platinum 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 platinum is 50 troy ounces. So each $1
move equals $50. 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.
Platinum 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 platinum 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
platinum product then futures may be for you. If you are a speculator with a limited amount of risk capital then platinum
options are a better way for you to invest in the platinum market.
