CORN

bull spread example

The National Weather Service is expecting a drought across most of the country next summer. You realize this won't affect corn yield until next year, but expect the news itself to have an immediate impact on the price of corn.

In this example the underlying corn future is trading at around 580. 

CHOOSE YOUR MARKET

You believe the price of corn will rise in reaction to the news.

You choose:

Buy Corn (Mar) 570.0-610.0 (2:15PM)

Corn Bull Spreads

COMPLETE YOUR TICKET

You Buy as you think the price of corn futures will rise by 2:15pm.

You select 5 contracts at the offer price of 583.1. Each contract is worth $1 per point.

Your Maximum Profit and Loss are displayed automatically.

The 'floor' and 'ceiling' have been set at 570 and 610 respectively.

The most you can make is $1345; the most you can lose is $655*.

MONITOR YOUR TRADE

Your position will expire at 2:15pm. 

The difference between Nadex' calculated expiration value and your opening price of 583.1 will determine your profit or loss.

  1. Profit

    At 2:15pm, the calculated expiration value for corn has risen above your opening price to 604.2. 

    The difference between your opening price (583.1) and the expiration value (604.2) is 21.1, or 211 pips.

    Multiply 211 by the number of contracts (5) and the value per contract point ($1) to calculate your gross profit.

    211 x 5 x $1 = $1055*

    This is lower than your maximum potential profit because the settlement price fell short of the Bull Spread’s ceiling, 610.

    *Fees apply

  2. Loss

    At 2:15pm, the calculated expiration value for corn has fallen below your opening price to 579.6. 

    The difference between your opening price (583.1) and the settlement price (579.6) is 3.5, or 35 points.

    Multiply 35 by the number of contracts (5) and the value per contract point ($1) to calculate your gross loss.

    35 x 5 x $1 = $175*

    This is lower than your maximum potential loss because the settlement price fell short of the Bull Spread’s floor, 570.

    *Fees apply

Commodities

More examples

Bull Spreads

Bull Spreads are simple derivatives suitable for traders looking for high leverage and hedging opportunities. 

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Bull Spreads
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