As an example, in a November soybean futures contract, a seller has the right to deliver 5,000 bushels of soybeans in November and a buyer has the right to stand for delivery of the soybeans. Some futures only have a few delivery months and others have a delivery mechanism in all 12 months. A futures contract expires after the designated date in the delivery month. In the case of oil, the “CL” stands for the underlying futures contract. The “Z” stands for a December delivery month. (F=Jan, G=Feb, H=Mar, J=Apr, K=May, M=June, N=July, Q=Aug, U=Sep, V=Oct, X=Nov, Z=Dec) The “7” stands for the year – 2017. This is the standard formula for futures ticker symbols. Some quote services may differ slightly so always make sure to check with your provider who will provide you with a list of ticker symbols for all futures markets. To calculate the value of a tick, you would multiply 1,000 x .01 = $10. So, every time you see the price of Crude Oil move up or down .01, you know that means it’s a $10 move. A five-cent move in the price of Crude Oil would mean it is worth $50 if you are trading one contract. In gold, the minimum tick size is 10 cents, since the total contract value is 100 troy ounces, one tick also equals $10 per contract. While gold and oil have the same per tick value, other futures contracts vary so make sure you familiarize yourself with the minimum tick values for each of the contracts you intend to trade. Contract Specifications are something you need to memorize before you begin trading commodities and futures. Costly errors can occur by not understanding these numbers. It is not uncommon for a novice trader to make a costly mistake by buying or selling contracts that are far too large and volatile for their accounts. It is always better to be prepared with knowledge before you start trading, learning the hard way can be very expensive.
