Get a grip of yourself - by Milton L. Araujo: Um frasco de maionese - anonimo - Annonimous: Um professor, durante a sua aula de filosofia, sem dizer uma palavra, pegou um frasco grande de maionese e esvaziou ... depois encheu com b...
This post has been written as a letter from me to you! I am writing as I process things in my mind. No spelling checks, no grammar, or proper sentence structuring was applied. I actually have not proofread my posts. It is just a personal message. Ha muitos posts em PORTUGUÊS mas também uma opção para traduzir. (posts in Portuguese can be translated) - I am not making any money with this Blog. I do not require anyone to follow.
About Me - Milton Laene Araujo
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- Milton Laene Araujo
- Lake Worth, Florida, United States
- My name is Milton and I am a reader. I love to feed my mind with what if’s?, through stories.
11/21/11
Um frasco de maionese - anonimo - Annonimous
Um professor, durante a sua aula de filosofia, sem dizer uma palavra, pegou um frasco grande de maionese e esvaziou ... depois encheu com bolas de golf.
A seguir pergunta aos alunos se o frasco estava cheio. Os estudantes responderam sim.
Então o professor pega uma caixa cheia de pedrinhas e mete-as no frasco de maionese. As pedrinhas ocuparam os espaços vazios entre as bolas de golf.
O professor voltou a perguntar aos alunos se o frasco estava cheio, e eles voltaram a dizer que sim.
Então o professor pegou outra caixa ... cheia de areia e colocou a areia dentro do frasco de maionese. Claro que a areia preencheu todos os espaços vazios, e uma vez mais o pofessor voltou a perguntar se o frasco estava cheio. Nesta ocasião os estudantes responderam unânimes "Sim!".
Em seguida o professor acrescentou 2 xícaras de café ao frasco e, claro, o café preencheu todos os espaços vazios entre a areia, as pedrinhas e as bolas de golf. Os estudantes então começaram a rir...mas repararam que o professor estava sério e disse-lhes:
'QUERO QUE SE DÊEM CONTA QUE ESTE FRASCO REPRESENTA A VIDA'.
As bolas de golf são as coisas Importantes:
a FAMÍLIA, a SAÚDE, os AMIGOS, tudo o que você AMA DE VERDADE.
São coisas, que, mesmo que perdessemos todo o resto, nossas vidas continuariam cheias.
As pedrinhas são as outras coisas que importam como: o trabalho, a casa, o carro, etc.
A areia é tudo o demais, as pequenas coisas.
'Se puséssemos 1º a areia no frasco, não haveria espaço para as pedrinhas nem para as bolas de golf. O mesmo acontece com a vida'.
Se gastássemos todo o nosso tempo e energia nas coisas pequenas, nunca teríamos lugar para as coisas realmente importantes.
Preste atenção às coisas que são cruciais para a sua Felicidade.
Brinque ensinando os seus filhos,
Cuide bem de sua família (não esqueça de incluir seus pais),
Arranje tempo para ir ao medico,
Namore e vá com a seu namorado(a) /marido / esposa jantar fora,
Dedique algumas horas para uma boa conversa e diversão com seus amigos,
Pratique o seu esporte ou hobbie favorito.
Ocupe-se sempre das bolas de golf em primeiro lugar,
Haverá sempre tempo para trabalhar, limpar a casa, arrumar o carro...
Estabeleça suas prioridades, o resto é só areia...
Porém, um dos estudantes levantou a mão e perguntou o que representaria, então, o café.
O professor sorriu e disse:
"...o café é só para vos demonstrar que não importa o quanto nossa vida esteja ocupada, sempre haverá espaço para um café com um amigo. "
Attitude
PARA MOSTRAR QUE
NÃO IMPORTA COMO VC VAI CONSEGUIR, MAS SIM
QUE VC FEZ A SUA PARTE!!!
Tudo começa com uma ATITUDE !
Este é um comercial indiano que não vende nenhum produto.
Fala da diferença que faz a iniciativa.
Fala da força que nasce da união.
Fala da solução pela colaboração de todos, não importa o tamanho do problema.
Fala de objetivos.
Fala de exemplos...
Algo que o mundo precisa bastante e, como mostra o filme, é tão simples de conseguir.
Tudo começa com uma atitude!!!
Carmen Halsey
NÃO IMPORTA COMO VC VAI CONSEGUIR, MAS SIM
QUE VC FEZ A SUA PARTE!!!
Tudo começa com uma ATITUDE !
Este é um comercial indiano que não vende nenhum produto.
Fala da diferença que faz a iniciativa.
Fala da força que nasce da união.
Fala da solução pela colaboração de todos, não importa o tamanho do problema.
Fala de objetivos.
Fala de exemplos...
Algo que o mundo precisa bastante e, como mostra o filme, é tão simples de conseguir.
Tudo começa com uma atitude!!!
Carmen Halsey
2011 – O Ano mais Importante das Nossas Vidas - Anonimous
2011 – O Ano mais Importante das Nossas Vidas
Este é o ano da conclusão. A abertura do Portal 11.11.2011.A partir de agora o planeta Terra e a humanidade experimentarão uma energia de AMOR, LIBERDADE, RENOVAÇÃO e PAZ com a qual nunca, em tempo algum, pudemos sonhar ou imaginar. No entanto, o inverso acontecerá para as pessoas que não se prepararem para este grandioso evento. Devido ao aumento da frequência energética na Terra, com a abertura destes portais, toda energia bloqueada virá à tona para ser liberada e transmutada. Estaremos presenciando isso através da violência, incêndios, desastres naturais e com o aumento de doenças.
Hierarquias da Luz normalmente operam a partir de uma faixa de densidade mais alta do que a da Humanidade. Portanto, para receber a ajuda dela mais eficientemente, você tem que elevar sua faixa vibratória. Apenas com o simples ato de escolher o Amor, o vórtice é criado e a parte mais alta fluirá através de você, elevando sua faixa vibratória e facilitando a transmissão de ajuda dos planos superiores para a sua realidade. Uma vez feita a escolha, o vórtice resultante é absoluto e não há força escura no Universo, poderosa o bastante para fechá-lo.
No ano que vem, deveremos dar atenção especial ao Chakra Cardíaco, pois a tendência dele é de permanecer obstruído, encolhido, por causa dos medos associados ao amor. Uma preocupação particular é a doença cardíaca e haverá muitos mais incidentes de "ataques cardíacos" nos próximos anos.
Isto é porque a Mudança na consciência é um movimento em seu centro emocional de energia de um dos três chacras inferiores para o quarto, o chacra cardíaco.
Muitos não querem mudar ou transmutar esta energia, ou serão incapazes de suportar a intensidade da energia neste centro cardíaco. O resultado será um "ataque cardíaco". O Câncer é uma doença "devastadora", representante do medo, da negatividade, do julgamento e da falta de amor que tem sido fundamental para a condição humana.
A remoção destas emoções, na forma de perdão incondicional, é uma fonte de cura desta condição. Haverá um aumento no número de casos de câncer nos próximos anos, assim como de outras doenças, que parecem destacar as áreas da experiência humana que requerem o perdão.
Mestre EL MORYA nos diz que: "Nem sempre serão catástrofes naturais que tirarão a vida de muitas pessoas, a elevação da vibração será demasiada e muitos não suportarão, pois seus karmas os impedem de se adaptar.
Explico isso antes de tudo começar, para que vocês estejam preparados para confortar as pessoas que estiverem sofrendo, explicando-lhes o que está acontecendo, de modo que possam se preparar para tudo o que está por vir. Não ocorrerá somente uma entrada maravilhosa em uma vibração superior, haverá também muitos inconvenientes associados a ela.
A Nova Era trará tudo para que a Terra se torne melhor e mais bonita. E se as almas que causam essas agitações ficassem por aqui, ainda iria durar um longo tempo até que reconhecessem o que estava errado em suas vidas.
Mas quando elas estiverem em outro mundo, irão captar isso imediatamente. Na época da Atlântida e Lemúria, as pessoas eram de certa forma mais evoluídas do que agora, mas lhes faltaram o amor e o conhecimento para a vida e, então, elas falharam. Hoje, essas pessoas encarnaram novamente e trouxeram a agitação para o mundo. Dessa vez não cairá um continente, assim como ocorreu na era passada, mas muitas pessoas irão mudar ou precisarão continuar sua evolução em outros planetas".
As Hierarquias de Luz estão "segurando" alguns acontecimentos para que a grande maioria "desperte" o quanto antes, a fim de que se efetive de vez, a separação do "joio do trigo". Então, não temos muita escolha: ou despertamos agora, ou iremos para outros mundos kármicos, em volta com todo sofrimento, dor e angústia que essas dimensões envolvem.
Temos hoje uma taxa de entre 15% a 18% da humanidade que está despertando para a espiritualidade, 20% está incerta e indecisa quanto à mudança e o resto está perdido e terá que recomeçar suas vidas em outros mundos mais densos.
A grande maioria da população não está sintonizada com este tipo de energia, e isso nós dá bem a medida do número de pessoas que serão apanhadas de surpresa, envolvidas nessa mortalidade maciça. Pois não há interesse pelo desenvolvimento espiritual; por um lado, ou são fanáticos religiosos ou buscam apenas o desenvolvimento material. Com isso, estão simplesmente "jogando as suas vidas ao espaço". Se vocês observarem e estiverem acompanhando os diversos sites e blogs, as mensagens espirituais e canalizações informam que muitas pessoas próximas a nós desencarnarão, já nos próximos anos.
Você poderá achar que as mensagens são "duras" e "cruéis", no entanto, tente perceber que há um propósito Divino. Se a maioria da humanidade focasse no amor, não haveria mais problemas. O que está acontecendo atualmente no planeta Terra é que a Humanidade vive apenas e exclusivamente para atender a si mesmo, ao seu ego, a sua satisfação pessoal, ao seu crescimento material. Não há interesse pela verdadeira espiritualidade. O que hoje as "religiões" do mundo pregam não equivale nem à ponta do iceberg.
Leia a mensagem de um ser espiritual: "Chegou a hora de saberem o que significa ter acabado o tempo de brincar com a espiritualidade. Dizer que a «Mãe» vai passar a ser implacável, significa que vai diminuir a margem de tolerância para continuarem a agir «fora da lei», julgando-se donos da impunidade, agindo a seu belo prazer. Não têm alternativa. Não têm para onde fugir, nem através do desencarne: se a vibração for baixa, assim que desencarnam, ficam «presos» na zona sombria da 4ª dimensão. Portanto, não têm escapatória, não têm por onde se esgueirar para as dimensões mais altas, às quais acham que têm direito. Têm direito divino, mas só quando estiverem devidamente preparados. Sim, a «Mãe» vai tornar-se implacável... e eu vou ser intransigente! E, em 99% dos casos, o que fizerem não era o que precisavam. É por isso que a Humanidade tem tido tanta dificuldade em progredir de maneira não tecnológica.
Isto não é uma acusação, é a constatação de um fato. Ou ficam no planeta, ou, mais cedo do que avaliam, vão ter que partir. Quem decidir ficar terá um apoio diferente de quem decidir partir.
Agora, finalmente, vão ter que deixar para trás, definitivamente, a ingenuidade, a imaturidade, o auto-engano e a auto-indulgência. Ou seja, agora tudo precisa ser levado a sério. E o fato de vocês concordarem ou discordarem destas palavras e do que elas significam, não tem a mínima importância.
Este processo não depende da aquiescência ou recusa humanas. Pela primeira vez, vocês vão reconhecer que são responsáveis por sua vida e pela qualidade dela, a todos os níveis. Isto não é uma ameaça; é o que têm de saber".
É de suma importância que vocês tenham pelo menos uma compreensão básica do esplendoroso e complexo Plano Divino que está se desenrolando, passo a passo, a fim de assegurar que o processo de Ascensão para a humanidade e para a Terra seja cumprido conforme decretado.
Vocês da vanguarda tem um papel importante a desempenhar, para com o processo de Ascensão que se encontra em plena ação. É como se a sua conexão estivesse sendo puxada e arrastada em direções diferentes, à medida que o Espírito tenta chamar a sua atenção. Você pode resistir e conter-se, chutando e gritando, mas finalmente avançará na espiral da evolução. O Eu álmico está advertindo e estimulando a todos, em um ou outro grau, através de um esforço para atrair a atenção de cada alma. Ninguém pode manter o ‘status-quo' de viver despreocupadamente, ignorando o chamado para despertar. Você pode crescer e ascender em consciência, ou mergulhar mais profundamente no caos e na limitação, adiando o inevitável. Estamos destinados a retornar a um estado aperfeiçoado, então por que não aproveitar a jornada da efetiva transformação?"
Em 2012, a Terra já estará em frequência muito mais alta do que a de agora e só suportarão os que aumentarem a própria frequência pessoal.
Cada pessoa desperta é uma peça importante no processo ascensional e no salto quântico. Aqueles que tiveram coragem de ouvir esse chamado estarão sendo encaminhados para uma Dimensão Superior. As almas que evoluíram e expandiram sua energia, saberão instintivamente onde estar e o que fazer, e assim, sobreviverão. Vocês não estarão perto e muito menos serão parte dessas situações.
A própria energia de vocês desviará também de todo acidente, assaltos e muito outros infortúnios que irão acometer, infelizmente, a mais pessoas, não por castigo divino, mas devido à baixa frequência energética da própria pessoa, que atrairá para si esses acontecimentos trágicos.
O desafio hoje é aprender a manifestar o nosso potencial e a nossa maestria no pouco tempo que nos resta para o término do ciclo na Terra, pois ele se tornou escasso demais, e o período que nos sobra, desperdiçamos com bobagens e superficialidades. O que continua nos faltando é direcionamento de nossas energias para um foco mais produtivo.
Todos nós somos seres de muita luz, mesmo aqueles que nunca direcionaram essa energia para algo construtivo, pois quando atingimos um patamar de Luz, transformamo-nos em lâmpadas de diferentes intensidades, e dessa forma, somos localizados pelas Hierarquias Espirituais.
Veja o que Ashtar Sheran disse sobre a Humanidade: "É minha escolha trabalhar com a Raça Humana, e considero que isto é uma grande honra. Amados Irmãos e Irmãs da Terra, aos olhos da Criação, vocês são dos seres mais importantes, é seu direito de nascença a escolha de seu futuro."
Agora somos mais de dois milhões de trabalhadores ativos e despertos, seres que deliberadamente, abraçaram a consciência da luz. Cada pessoa, cada um que vive essa vida agora, nesse momento crucial da história da Terra, veio para romper com tudo o que escraviza, veio para manifestar o que realmente é, senhores e não escravos.
Somos Deuses, Divinos, ilimitados e Eternos. Não precisamos buscar por mais energia, mais sabedoria, mais amor ou mais felicidade. Tudo já está dentro de nós. Temos, sim, que aprender a fazer a reconexão que vai nos trazer esses milagres, e possibilitar a manifestação do nosso Potencial Divino, a Maestria, o grande Deus interior. Não é o guru ou a religião que nos controla, é a nossa recusa em sermos iluminados com a Chama da nossa própria Centelha Divina.
Sintomas Energéticos e Físicos do Portal 11:11:11 – Por Arcanjo Miguel
- Esgotamento físico e necessidade de dormir muitas horas. Isso é porque seus Corpos Físicos e Emocionais estão alinhados com as vibrações Superiores dos Corpos Espirituais para facilitar o completo alinhamento dos seus Aspectos Superior e Inferior.
- Stress Emocional e fim de relacionamentos. Tudo o que não estiver em integridade, terminará. Alguns finais podem incluir hostilidade, à medida em que raivas reprimidas venham à superfície.
- Depressão e tristeza. Um sentimento de ser incapaz de enfrentar ou estar fracassando. Não se preocupem. Isto tem que ser assim e seu Aspecto Superior vai dirigir esse processo de alinhamento. Não é uma prova, nem há nada por que passar ou falhar. Se estiverem experimentando estes sintomas de alinhamento, então, já triunfaram neste seguinte passo de seu processo de Ascensão.
- Aumento do caos aparente em sua vida. À medida em que vocês se tornam mais centrados na paz e na quietude de sua Alma e de sua Essência Divina no processo de alinhamento, o mundo externo parecerá cada vez mais caótico e frenético. Não permitam que isto os desequilibre. Permaneçam dentro da sua paz e sua calma neste momento maravilhoso.
- Sentimentos de vazio e solidão e tendência ao choro. Isto é parte da completa entrega ao Aspecto Superior. Vocês liberaram a posse do seu próprio Ego Inferior e entregaram o comando ao Superior. Este processo de alinhamento representa um "não espaço" ou "vazio" no qual o Ser Egóico pode se sentir muito só e perdido. Não permitam que isto subjugue vocês. Saibam justamente que isso passará e vocês avançarão para a completa realização do seu potencial como um Anjo Humano.
- Profundos sentimentos de Paz e Gratidão à medida em que o alinhamento é completado e vocês passam para a plena experiência do Portal 11:11:11. À medida em que despertam para as Mudanças Internas, celebrarão o intenso poder que sentirão como se os Aspectos Superiores e Inferiores se juntassem e o fluxo da Energia Cristal e da Consciência Superior passassem através dos seus corpos e dentro do sistema de Rede Cristalina do Planeta. Vocês começarão a sentir um sentimento de completa Harmonia entre si mesmos e o Planeta, enquanto suas energias de Nova Dimensão se ativam completamente dentro do Sistema da rede Cristalina. É hora de se preparar para a celebração!
11/10/11
Immigration Problems and a Viable Solution
Immigration Problems and a Viable Solution
In my opinion we should give documentation to everyone who enters into the United States United States China
Immigrants will have the rights to travel in and out of the country to visit their families.
--------- THE PROCESS
Start by authorizing immigrants to register with Home Land Securities through the Department of Motor Vehicles. An Identification Number will be issued which will be the main identification. From that moment an immigrant is allowed to open a bank account, apply for positions and do works that we are today paying other countries to do.
In other posts I mentioned about legalization of drugs, gay marriage and other topics of general interest. This time I want to talk about Immigration. After reading this post, please read about poverty.
We cannot, one hand talk about human rights while with the other depriving people of moving on their own will. We have food and land to accommodate everyone in this earth, and we need to control it better. I am not saying that America America
A Fee of $ 2,000.00 per person to obtain the rights to stay in the country, paid to the Home Land Security, which will include finger prints, pictures, medical exam etc. will be charged from each family or individual. This is a right that one needs to purchase to stay and be registered.
Once registered, any Americans can hire these residents to perform any types of works. Farms, plantations, strawberry fields, egg farms, etc. This will help farmers to retain more profit, and at the same time help financially a family that came from poverty from other places in America
It is necessary to open a seat into the United States Congress for a representative of temporary residents, which today we have approximately 10 million people living illegally in the United States
Today we are facing a difficult challenge of controlling our borders and building fences etc, to stop immigration. Yet, it is clear that every year we have a flock of immigrants entering into the United States Arizona America
If we document everyone we can have a better control of the population. If we don’t, people will continue staying illegally in America
Today, illegal immigrants have it very hard. They move into places by the dozens, and make money enough survive, but they share shelter and food. America
I believe that America America America
11/07/11
Poverty is at a high of 49.1 million or 16% in the U.S.A
On September 17, 2013 the news announced poverty as being 46.5 Million People
As described in Wikipedia, Poverty is the state of one who lacks a certain amount of material possessions or money.[1] Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live in absolute poverty today. Relative poverty refers to lacking a usual or socially acceptable level of resources or income as compared with others within a society or country.
As described in Wikipedia, Poverty is the state of one who lacks a certain amount of material possessions or money.[1] Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live in absolute poverty today. Relative poverty refers to lacking a usual or socially acceptable level of resources or income as compared with others within a society or country.
About 25,000 people die every day in the world of hunger or hunger-related causes, according to the United Nations.
This is one person every three and a half seconds, Yet there is plenty of food in the world for everyone. The problem is that hungry people are trapped in severe poverty. They lack the money to buy enough food to nourish themselves. Being constantly malnourished, they become weaker and often sick. This makes them increasingly less able to work, which then makes them even poorer and hungrier. This downward spiral often continues until death for them and their families. - Hunger and World Poverty Sources: United Nations World Food Program (WFP), Oxfam, UNICEF.
….In America, let’s start by:
Improving the quality of education for poor children and education opportunities and incentives, and by Improving opportunities and incentives for poor young females to have children only when they can assure their wellbeing, and by Improving work opportunities and incentives for the poor so they can provide well for themselves and their families..
We need responsible policies and responsible behaviors, starting with each individual behaving more consciously. Every child needs to be educated.
The remedy at this moment is to increase minimum wage to $10.00 across the board and pay for this difference with tax incentives to the employer. Meaning, the employer will not pay for this tab.The remedy is also: America
American Government needs to take a break of outside activities and concentrate in its people at home.
We the People are suffering today more than ever. The absurd increase of the crude oil price in 2008, which can’t ever be explained in detail by anyone, went from $75 per barrel to $145 in a period of six months, oscillating up and down, making the biggest future trading in history, where speculators wanted to buy calls on crude oil and gasoline, and trade every other commodity contract to be a part of the oil trading. It was blamed in the number of refineries that America possess, and the age and condition of each refinery, which was not able to keep up with the demand for gasoline, thus making the oil prices go up, for America buys refined combustive from other countries, such as Venezuela, etc.
A reason given by the news about oil prices increase was all the disruption that was taking place in certain OPEP countries at that time. For whatever reason, the tab was handed to us. Very soon after the record oil price of 2008, food also doubled in price at food stores. Everyone blamed the transportation of goods and materials. People could not keep up with the increase in prices and with their high mortgage prices. A trip to the supermarket became something painful.
When oil prices wend town, as it did it slowly, gave speculators the chance to take another ride into the volatile roller-coast of oil pricing. The damage to the people was already created, and prices for food went down a small fraction of its increase. People were able to retain less money. (By the way, we are still talking about poverty here).
The biggest factor of all involves the banking industry and financial institutions. House lenders, in 2004-2005-2006 offered mortgages with monthly payments of 1% to 2% of the price of the immobile. People jumped into buying big houses in large communities priced at $500.000 dollars and signed their contract for a mortgage– Many chose to pay around $1500 per month to be near the 2% range, and signed a contract for 30 years with mortgage ranging from $1,500.00 to $3,500.00 per month.
These types of mortgages sounded very attractive and a boom in house industry echoed around the country. However, Banks were not able to keep up with their lending because they were not receiving enough deposits to justify it, and little by little it showed its face, bringing house prices down to justify the amount of money that have been invested and the amount of money it will collect. Once revealed, house prices started to decline, to a point where everyone is up-side-down on their mortgages. Those who bought big homes can not keep up with maintenance and utilities bill, defaulting on their mortgage and making even worse for the banking industry to recover its loss. The government pitched in and helped Bank of America and other entities with our tax dollars.
Once housing industry is in decline, businesses in all areas will go to where labor is cheaper. So, a boom in taking your company overseas where labor is cheaper contributed to the job loss we see today.
People are not spending as much money as before; therefore many places go out of business for not being able to stay afloat. Hence, it brings poverty.
Today we have a country with all amenities, but we are not able to afford them. People are losing their jobs, their houses, their income, and their families. Everyone takes xanax or paxil to relieve their anxiety of facing a reality that once was different. Pharmaceutical industry blooms making all sorts of drugs to make one sleep, or stay awake. What to do when you are hungry and there is nothing to eat?
Like I said, we need new policies that encourage teens not to get pregnant – We need to let aside the abortion discussion for one entire year and concentrate in those that are here, and educate them, feed them. Why create so many policies when we are not able to keep our children alive to follow theses policies.
I am sorry to say that the reality is far worse than what we perceive now.
11/06/11
Gay issues
Get a grip of yourself - by Milton L. Araujo: Gay issues 2011 - By Milton Laene Araujo: A man has an infinite number of pieces. Each piece is connected into a central computer. This computer, called brain, collects each piece of...
11/03/11
FUTURES TRADING theory Series 3 Exam - Commodity Broker -
INTRODUCTION
This manual is intended to prepare you to pass the NASD Series 3 exam, which will allow you to be registered as an Associated Person AP, or Registered Commodity Representative, RCR, with any firm dealing in the trade of Futures and/or options on Futures contracts.
If you choose to memorize questions and answers prior to taking the exam, it will most probably result in failure.
It is important that certain concepts be learned, and applied in each exercise.
You must therefore decide to put forth 4 and ½ hours per day, with an honest effort, if you are to successfully pass your exam.
My goal is that you learn this material. I will teach you a few “tricks”, for easy interpretation of the problems.
Remember – This is an exam, not the real world. So, the information you are about to receive can be very deceiving. A question will appear with extra data to get you confused. The exam is extremely difficult! It will test how well you have prepared yourself for the task.
If you have investment experience, and begin to doubt the information presented in this manual, do not take it for granted. You need to know that many concepts differ between commodity trading and stock trading, including the commodity options.
You will be successful on your first exam attempt if you follow the LIGHTS FOR PASSING, which I will present to you as we move along.
At first, I am covering the MATH of the matter.
Then, we will add some theoretical relevancies to help you understand which LIGHT apply to each MATH problem. Finally, we will cover everything else.
I will be communicating with you during the entire process.
Let’s move on the next page to situate ourselves with the INDEX.
PS -
When finishing read – click one of the ads on the side for me to make some money.
Quando terminar de ler, clique na propaganda – assim ganho din din
INDEX
CHAPTER 1
1- Speculating FUTURES
1.1- Markets knowledge Applied – Long and Short, cash and cash forward contracts.
1.2 - Speculation Problems. How to solve them?
1.3 - Speculating with Financial Contracts
1.4 - Contract Pricing
1.5 - Speculating FUTURES with Margin - Problems
CHAPTER 2
2- Hedging FUTURES –
2.1 – Basic Hedging problems and how to approach
2.2 - Basis calculation Problems
2.3 - Hedging commodity futures – Chapter 4
2.4 - Hedging Financial and Monetary Futures – Chapter 5
Hedging Financial Contracts FUTURES – Problems
CHAPTER 3
Interest Rate FUTURES – Problems
Stock Index FUTURES – Problems
Foreign Currency FUTURES – Problems
CHAPTER 3
Options ON FUTURES – Problems
CHAPTER 4
Technical and Fundamental Analysis
CHAPTER 5
An overview of everything we learned so far!
CHAPTER 6
Everything else
CHAPTER 1
SPECULATION ON FUTURES –
1.1 Markets Knowledge Applied
Speculators try to forecast price changes and take positions based on their forecast. They are people like you and me, who can make money if they forecast correctly the direction of the price of any commodity, or lose money when they are wrong. Their role is to add liquidity, and not to forecast prices.
Speculators have no interest in owning the physical commodity, so they offset their futures position before delivery.
Speculators increase liquidity in the futures market. Liquidity here is money, which enable the market to operate more efficiently.
The more speculators, the more liquidity we see in the market, therefore Market Liquidity is found by increasing the number of traders.
Increasing trading volume allows large trades to be executed without dramatically affecting prices. When I say large trades, I mean large orders.
If we have only few speculators, and a large trade is executed, it can change the price of the commodity faster than when we have more speculators. For every contract traded by hedgers (Participants that usually take or make delivery of a commodity), there may be 30 or more contracts traded by speculators. Increasing trading volume allows large trades to be executed without dramatically affecting prices. When I say large trades, I mean large orders.
A Thin Market is usually more risky, for it is illiquid. Not much money changing hands. It is thin because it doesn’t have enough participants. So prices can be volatile. It can go up or down inconsistently. So, the greater the volatility in the market, the greater the markets risk.
Now, if we have a market with many participants, we have a market with increased liquidity, and it improves market efficiency.
This being said, I prefer cover speculation problems by giving you better information about futures contracts and how they work.
Basic Market Information –
I want to start with the CASH markets. There are two types of them. The first is the market we are familiar with. For instance when you purchase gold in a local store, the dealer will look at the current “going” price for gold, then add his “mark-up” to arrive to a retail CASH or spot price, which you must pay. A farmer would sell his product and receive the “going” or “cash” price, is another example.
The second type of cash market is known as the “cash forward” or to “arrive” market.
A cash forward contract is negotiated between buyer and seller, one-on-one, for a specific product, at an agreed upon price, and for a future delivery.
The difference between Cash forward contracts and futures contracts is that the buyer and seller do not meet. Instead, the transaction takes place in a trading floor of the commodity exchange. There are over 87 commodities, and they are traded in different market exchanges. The commodities are traded in an auction market. The futures contracts are legally binding. The main advantage of futures contracts is that it allows speculators to participate, bringing therefore, liquidity. It is standardized, with a set quantity, quality etc. This ability to speculate and hedge in the futures contracts help to keep prices lower. The futures market provides price forwarding because its liquidity. We are talking about price forwarding here… do not get confused with cash forward mentioned before.
Imagine a farmer who has not yet harvested his crop, but has already negotiated with the buyer of the crop to deliver his crop in three months at a set price. This farmer has negotiated a “cash forward” contract in order to assume himself of a price. The cash forward contract brings stability in the cash market. This contract is illiquid, and referred to as not efficient.
Now that we know what is “cash market”, we can then move on to FUTURES MARKETS.
A futures contract is a promise to make delivery (if short) or take delivery (if long) of a set quantity of product, with a set quality, at a set price, in a set time period.
Long – One who buys or holds the contract.
Short – One who sells or issues the contract.
SHORT AND LONG A FUTURE CONTRACT
Let’s first examine the long position.
Long the market – The owner of the Futures contract holds the contract with a price tag that is written in his contract. When he purchases the contract he goes long the market. He is the new owner of the contract. He wishes the market price (the “going” price) of that commodity to move up, higher than the price written in his contract, so he can sell for the current market value, (CMV), and keep the profit.
Picture this scenery:
Today is September 1st, and you (as an speculator), have an opinion that the price of Crude oil is going to move higher before the month of November. You go long the contract. What actually happened?
LONG 1 NOV CRUDE OIL CONTRACT @ 73
You called to your AP and told him to buy a Nov crude oil contract. The AP phoned the order to the floor of the exchange (the pit). The floor broker filled the order and returned it to the AP for reporting back to you, the client. The futures contract has just been transferred to you. You entered an agreement and backed it with your good faith money and a promise to take delivery. You good faith money is called Initial Margin. It is returned to you after the contract is traded. It ranges around 5% of the full price of the contract.
You are making a promise to do something in the future. You are promising to take delivery of 1000 barrels of oil in November, and pay $73 per barrel or $73,000.
Now, assume that by September 25th the current price of the NOV CRUDE OIL CONTRACT price is at $81 per barrel. You believe this price is a high as it will go, and decide to SELL your contract. If you get $81 on the sale, you are now rid of your agreement with the following results.
Bought a CRUDE OIL contract for $73 per barrel
Sold a CRUDE OIL contract for $81
This is an $8 profit - A gross profit of $8 x 1000 (the size of the crude oil contract)
= $8,000.
You bought (went long) then sold (liquidated) the contract.
- Anytime you go long, you have to get out by going short. And vice-versa.
Now Let’s examine the Short Position:
Short the Markets
On March 5th you have a hint that the price of sugar has topped out and will probably go down in the coming months. You make your calls and now went short the future contract. You told your AP to sell 1 may contract at 17 cents per pound. (One contract has 112,000 pounds)
SHORT 1 MAY SUGAR@17 ----- sugar is traded in cents per pound
The initial margin money is still placed with the clearinghouse, and a new agreement you have entered into. In this case you promise to make delivery of 112 thousands pounds of sugar sometime in May and receive $17 cents /pound or $19,040 (.17X112000 = 19,040).
Now assume on the 29th of March the May price of Sugar moves to 14 cents. You decide to buy back a contract for the same quantity, and for the same month in the same clearinghouse, to offset your responsibility and take your profits.
As you see now that you went short, to offset your contract you must go long.
You profited 3 cents per pound.
.03 X 112000 = profiting $ 3360 per contract Gross.
************
When you go short, you promise to deliver something that you do not have, and before expiration you need to buy the same commodity, hoping that the price went bellow your selling contract. Because you went short, now need to buy, or go long to offset your position. Speculators who go short the market are forecasting that the prices of the commodity will decrease.
A hedger, as mentioned before, is a person who is involved in large purchases or sells because he either produces or uses the commodity. He is an active participant of the markets and therefore is said to be less risky.
A Hedger pays less for his initial margin than a speculator. They offer less risk, for they can back up with a merchandize, while a speculator will have to come up with cash to settle his contract. Only 3% of all contracts traded are delivered. The rest is all speculation, or participants trying to forecast what price will go up in the near future, or in the distant future. It is necessary to have the real commodity to be able to create a contract.
1.2 SPECULATION PROBLEMS – How to solve them
Solving problems concerning speculation will involve a basic knowledge of everything we are going to study. Speculation is the calculation of gain or loss of the futures half of a hedge problem. Profits accrue for a long when prices rise, and for a short when price decline. The following LIGHTS will be applied in different type problems.
LIGHT 1- SPECULATION
Always work ONE contract through first, THEN multiply the answer times the number of contract.
In other words, find the profit or loss net and later multiply by the number of contracts.
Example 1:
1- your client is long 2 cocoa contracts, which he purchased for $1,150 per metric ton. Later, the client sells the contract for $1,247 per ton. With Commissions of $65 per round turn (per contract – including buying and selling the contract), and a contract size of 10 metric tons, what is the result of the trade?
SOLUTION:
2 10 metric tons $ 65
___________ ________________ _____________
# Contracts Contract size Commission
$1,247 Sale
$1,150 Purchase price per metric ton
$ 97.00 Per ton Gain (gross)
X 10 Contract size = 10 metric tons
$ 970.00 Profit per contract GROSS
- 65.00 Commission
$ 905.00 Profit per contract NET
X 2 Number of contracts
$1,810.00 Net profit on the trade
LIGHT 2 – SPECULATION
Work every speculation problem as above. Follow the organization pattern presented to you. Write down each step as above, and do not calculate total commissions to subtract. And remember, if you have a profit you must subtract commission. If you have a loss, you must add commission.
Your mistakes in calculating will appear when you use short cuts. We have many things to cover, and it is necessary that you follow this pattern. If you skip this pattern, things will get more complicated later. Remember that when you do speculative problems, you are going to do it with commodities quoted in cents, and financial instruments that use points. It is a lot to remember! Therefore, follow my instructions.
LIGHT 3 – SPECULATION
ANY and ALL commodities quoted in “cents” per unit, (cents per pound, per ounce, per gallon, etc.) MUST be converted to “dollars” per unit, by moving the decimal two places to the left BEFORE working the problem.
Example 2:
2- a client buys 4 live cattle contracts when the price is at 81.525 cents per pound and later liquidates when the price is at $83.275 cwt. With a commission of $70 per contract, and a contract size of 50,000 lbs, what is the result of the transaction?
A problem such as this will be in your test. It starts stating cents and then, it gives the other price in cwt. You see a dollar sign in one part and are let to decide the other part.
HINT: 81.525 cents per lb = .81525 per pound
$83.275 cwt (cwt means per hundred pounds). = .83275 per pound
SOLUTION: Result of transaction?
4 50,000 lbs $70
# Of Contracts Contract size Commission
Sell .83275
Buys .81525
.0175 PROFIT OF per pound
X 50,000 per contract size
$ 875 PROFIT per contract gross
- $ 70 Commission per contract
$ 805 PROFIT net per contract
X 4 Number of contracts
$ 3,220 Net profit on a trade = result of the transaction
1.3 LIGHTS FOR SPECULATING IN FINACIAL CONTRACTS
As you have seen so far, speculating is the act of purchasing and selling a contract, or vice-versa. You know what to do when you see a commodity price quoted in cents. (See LIGHT3)
Financial contracts are those contracts we purchase from financial institutions. There are two types of Financial Contracts: Short term and long term. We work them differently.
Short-term financials considered 90 days:
Treasure Bills (T-Bills)
Eurodollars
Certificate of deposit (CDs)
Commercial paper (CP)
LIGHT 4 –SPECULATION – Short Terms
ANY Financial Futures with a decimal in the quote is short term, drop the decimal, and each point is equal to $25,00
LIGHT 5 – SPECULATION – short-term Contract sizes
With short term we do not use the contract size to figure the profit or loss on the trade. As soon as you determine it to be a short term financial, follow LIGHT 4.
Example 3:
3- a speculator goes long 6 Treasure bill futures for 91.75 and later offsets the trade when futures are at 92.78. With a contract size of $1,000,000 and commissions of $75 a round turn, what is the result?
SOLUTION - What is the result?
Note that it is a short-term contract!
6 1 Million $75
# Of Contracts Contract size Commission
Sell 9278 - Note that the decimal vanished and we have points
Buys 9175
103 Point gain
X $25 per point value <Instead of contract size>
$ 2575 PROFIT per contract gross
- $ 75 Commission per contract
$ 2500 PROFIT net per contract
X 6 Number of contracts
$ 15,000 Net profit on a trade = result of the transaction
LIGHT 5 – How to find
Long Term Financials considered years:
Treasure Notes (5 and 10 years)
Treasure Bonds (20 years)
Corporate Bonds (20 years)
Municipal Bonds (20 years – Munies)
GNMA (30 years)
LIGHT 6 – SPECULATION Long Term financials
ALL Long Term financials futures have a “hyphen” or “dash” in the quote. All financial Futures with a dash in the quote are in 32nds, and 1/32 = $31.25
Example: 96-14 = 96 thousand dollars plus 14/32 or (14x $31.25) = $437.50 for a total of = 96,437.50
Example 4: – Long Term
Mario sells 3 contracts of September T bonds when the prices was 98-14, and latter off set his position by going long the contracts at 96-18. With Commissions of $60 per contract, and a contract size of $100,000 what is the result of the trade?
SOLUTION – What is the result of the trade?
Note that it is a long term contract!
3 100 Thousand $60
# of Contracts Contract size Commission
Sell 98-14/32 - Note that we have a dash
Buys 96-18/32
Here we have a situation where we cannot subtract 18 from 14. In this case 14 needs to borrow one point from the 98. This way, 98 become 97- (14 receives 32 points becoming 46) – So, it was 98-14 and it became 97-46 (same value).
Therefore:
98-14 = 97-46
- 96-18
1-28 Gross per contract
1-28 = One thousand (plus 28/32 = 28X 31.25 = 875.00) = $1,875
$1875 PROFIT per contract gross
- $ 60 Commission per contract
$1815 PROFIT net per contract
X 3 Number of contracts
$5,445 Net profit on a trade = result of the transaction
It is really important that you learn and follow the above LIGHTS. If not, you will have a difficult time working with the financial problems on the series 3 exam.
1.4 CONTRACT PRICING
It is necessary to observe which form the price was given to you. It can be given in various forms. Although, we only covered a few ways, most mistakes occur when we oversee pricing.
It is not necessary to memorize contract sizes. All the questions of the exam will give you the contract size, even when it is not necessary to know it in order to calculate profit or loss, as in case with the financial contracts. It is however, necessary that you know how to work with the information you are given.
The main difficulty most people encounter is trying to deal with the price quote of a commodity if it is quoted in less than a penny.
$ 2.10 = 2 dollars and 10 cents
$ .10 = 10 cents
$ .1000 = 10 cents (the number of zeros after the decimal point change nothing)
$ .01 = 1 cent
$ .0100 = 1 cent
$ .0150 = 1.5 cents (1 and 5 tenths of a cent) or 1½ cent.
$ .0125 = 1 ¼ cent (1 and 25 hundredths)
$ .0050 = ½ cent (5 tenths or 50 hundredths)
$ .0001 = 1/100th of a cent
Sugar, for example, is quoted in cents. If the price of Sugar today is 7.25 cents per pound = .0725 dollars per pound. We need to convert into dollars.
Silver, for example, is quoted in cents. If the price of Silver is quoted at 975.5 cents per ounce = $9.755 per ounce or nine dollars seventy five cents and ½ cent.
1.5 SPECULATING FUTURES WITH MARGIN - PROBLEMS
INITIAL MARGIN – PERFOMANCE BOND - When dealing with Futures Contracts, the performance bond invested is called Initial Margin. It can be referred to as Original Margin. The Margin occurs at the end of each trading day whenever a new position is entered, long or short, during the trading session.
The exchange sets the Initial Margin.
It varies from Commodity to Commodity
It usually represents 5% of the total value of the Contract
The exchange may raise or lower margin requirements whenever the board of governors deems necessary.
It is retroactive – it goes to all open contracts and new contracts.
It is not a down payment. It is “good faith” money.
A call made to a client requesting Initial Margin money to be deposited to enter a new position, is called Margin Call.
Margin requirements is usually met by cash
When a client use a financial instrument, such as government securities or stock of the clearing corporation, he will pay the determined “hair cut” which is a percentage of 10 to 20 % of the value of his instrument. T-NOTES 80% of the value is released to the client; T-Bones 80% also, and stocks 75%.
When stocks are used for margin, it is called: Taking the Discount. It can only be used for Original or Initial Margin. Not for Maintenance margin, which can only be met in cash.
The individual firm may require more initial margin per contract than the exchange, but never less.
MAITENANCE MARGIN CALL –
If a client had gone “short” gold at a contract price of $850, and at the end of the day the contract was quoted at $860, the account would have an unrealized loss of $10/oz or $ 1000. Even though the client has not actually taken the loss yet, the account will still reflect decrease in equity.
Therefore, at the end of the day, all accounts are “marked-to-market”.
After the account is marked to the Market, each is reviewed for possible maintenance margin calls. If the equity in the account is lower than 75% of the required (original or Initial) margin, the client will be placed on a maintenance margin call.
Once the maintenance call is “triggered”, the client must restore the account to the full original margin.
No money can be taken when the account only has a balance between Maintenance Margin and Initial Margin.
Example:
LONG 1 NOV SILVER @ $7.50
The original Margin is $1,000. The maintenance margin is $750.00
If in the end of a trading day, your account goes to a balance lower than 750.00 a maintenance call will be originated. The silver contract size is 5000 ounces. If the price of silver closed at $7.40 per ounce, the margin call will be for $500. The client would have to send another $500 to bring the account to the original $1000.
The marked cannot take a client off a maintenance call.
If in the end of the day, the client had equity above his initial margin, it is called Excess Margin and the client can use this equity.
The AP, or whoever handles the account is responsible in making the call and collecting the margins.
The equity can also be used to acquire new positions.
If there is equity less than the maintenance level, the client must bring the account to the initial margin. If the equity is in between maintenance and initial, customer cannot take any money out.
LIGHT 7 - The Chicago Board of Trade members only meet the margin call on the NET positions. In other words, if the firm or IB has clients in 100 long gold contracts, and 103 short gold contracts, the firm will only meet margin call for 3 contracts.
LIGHT 8 – The New York Mercantile Exchange (NYMEX), and the Chicago Mercantile Exchange (CME), requires firms to meet margin calls on ALL positions without netting. The client must meet margin calls on ALL positions. There are no lower requirements for bona-fide spreads.
PROBLEMS – SPECULATING FUTURES AND MARGIN
1- Initial Margin on corn is 20 cents per bushel; a client deposits $5,000 in margin and takes a long position in the maximum number of contracts he can at 291 cents per bushel. Contract size is 5000 bushels. What percentage of the market value of the corn is the customer margin?
HINT:
Customer margin = 20 cents per bushel or $.020 per bushel
Market value of the corn = 291 cents = $2.91 per bushel. This problem is paid over maid.
2- Assume a 20c/bu. is the initial margin for soybean futures on the CBOT. Your client goes short 3 soybeans contracts at $9.80 and commissions are $50.00 per round turn. If she covers her position at $9.63, what percentage of profit (after commissions) did she earn on her initial margin deposit?
HINT:
Calculate the gain per bushel using the speculation method. Remember to multiply the profit by the number of bushels in a contract
Remember to deduct commissions and after, that multiply by the number of contracts. Once the profit is calculated, divide by the margin paid in 3 contracts.
You can also do in only one contract – the ratio will be the same. This problem is made over paid.
3- A Client purchases soybean oil at $46.46/cwt. If the minimum margin is $1100 per contract, what percent of total contract value is required margin? (60,000 pounds/contract).
HINT:
Total contract value is the actual price times the contract size. This is the amount in risk. Remember to move the decimals before doing the calculation. Once found the Total contract value, we then take the margin and divide by the total contract value. Here is paid over maid.
4- September British Pounds are quoted at $1.8960 while the carrying charges to the next delivery month are 1.5 cents per month. If initial margin is $1000 and the September contracts declines to $1.8910, what is the percent of initial margin lost on a long position? There are 25,000 British Pounds per contract.
HINT:
We went long and the price declined. We have a loss.
The mention of carrying charges is smoke.
Calculate the loss and multiply by contract size. Find what the client lost, and then divide by the margin paid per contract. Here is made over paid.
5- If March Wheat contracts are sold short at 400 and repurchased at 415, with a round trip commission of $50.00 per contract, the net gain or loss on the transaction is: (5000 bushels)
HINT:
Wheat is sold in dollars. Move decimal that doesn’t appear two places to the left
6- If $3,500 is deposited and a $.20 per bushel margin is required for soybean contracts currently priced at 875, what is the percentage of required margin gained or lost if the price of soybean declines 3%? (5000 bushels)
HINT:
Wheat is sold in dollars. Move decimal that doesn’t appear two places to the left. We only need to calculate how much is 3% of the price and then multiply it by the contract size. Then divide it by the margin price per contract. It is made over paid.
7- A Trader is long one contract of Japanese Yen on the International Monetary Market of the Chicago Mercantile Exchange at .004267. The original margin is $2500 and the trader unwinds her position at .004415; with $60 per trade commission, what is the return on investment? 12,500,000 Yen per contract.
HINT:
Subtract yen values and calculate the profit. Multiply by contract size to get the profit, or your return. Subtract commission and Divide return by investment. Maid over paid
8- A Speculator deposits $2,500 of original margin and then buys one March Treasure Bill at 90.15, what is the ration of margin to total contract value? ($1,000,000)
HINT: 1,000,000 – 225,375 = 774,625
2500 / 774625 =
9- A trader foresees an opportunity in corn and buys a contract at $4.75 which requires a margin of $.30 per bushel; he deposits $3,500. If corn drops 3% in its value, what percent of his original margin is lost?
Hint: Do it like number 6.
10 COMEX Exchange margin is $2000 per contract for gold. The customer decides to sell one call with a strike price of $800 per ounce and the premium of $20 per ounce. The underlying price of the instrument is $790. The Margin requirement is? (Contract size 100 ounces).
HINT: The COMEX requires that the margin for option writing be the futures margin plus the premium received for the sale.
11 -A corn farmer realizes that his local basis is exceptionally strong, providing an excellent opportunity to liquidate his cash crop at a profit. The farmer believes that the price of corn will continue to rise, but that it is better for him to sell his crop and go long on the “board”; therefore he purchases a July corn contract at 341 ¾ c/bu (5000 bu per contract). His purchase required only 25% of his margin deposit of $5,000. Soon after, the corn prices rose to $425c/bu and he decided to liquidate his futures position. What was his profit? What was his return on required margin? If commissions charged were $50.00 per contract, what was his net return?
12- A livestock producer expects to produce 80,000 pounds of fat cattle. He decides to hedge, selling 6 June Live Cattle contracts on the CME (40000 lbs each contract). His Margin is $7,200 and his commission is $50 per contract round turn. If the price of cattle was $76.05 cwt when Joe sold his six contracts, what was his net speculative gain or loss if he liquidated at $71.10cwt?
13- Your client goes long 3 contracts of May Sugar, which was filled at 8.95c per pound. His position is liquidated at 8.60c per pound. What was the total value of one sugar contract when your client bought it? (World Sugar contracts are 112000 lbs.). What was the net gain or loss on the trade, if round turn commissions are $65.
14- A crude Oil speculator is expecting a decline on the price of crude oil. He sells 3 contracts of March Crude at $96.00 /bbl. He then sells 5 additional contracts at $94.00/bbl. He decides after all to purchase 10 contracts at 94.75. He sells 2 contacts at $97.65/bbl (barrel) What is his profit or loss after commissions, if commissions are $60 per round turn? (contract size =1000 barrels or 42000 gallons).
CHAPTER 2
CHAPTER 2
2- Hedging FUTURES –
2.1 – Basic Hedging problems and how to approach
2.2 - Basis calculation Problems
2.3 - Hedging commodity futures – Chapter 4
2.4 - Hedging Financial and Monetary Futures – Chapter 5
Hedging is the purchase or sale of a futures contract in anticipation of a later purchase or sale of the cash commodity. It can also be said that a hedger, in order to avoid price risk, transfer that risk to the speculator.
It is against the regulations to speculate in a hedge account. Hedging reduces working capital requirements.
There are two types of hedgers. Long hedger and short hedger
A Hedger who grows, manufacturers, or has a product in inventory is sometimes referred to as a “producer”. This hedger has it; therefore he is a seller, or short hedger. As a seller of a commodity, he would like to see the price of the commodity increase in so that when the time comes to sell his product, he will sell it at a higher price. The risk is in the possibility that the price will drop. To protect himself against a loss in a down market, the hedger will short the futures by placing a selling hedge.
A Hedger who will need that commodity in the future is sometimes called a “user”. This hedger needs it; therefore he is a buyer, or long hedger. The hedger would like to see the cash price drop, so at the time of purchase, the cost will be less. His risk is the possibility of an increase in price, for it would cause the user to spend more money. To protect against a possibility of an increase in price, the user will buy the futures contract. He will place a long hedge.
Before hedging, both the producer and the user would be at price risk. Once hedged they are at basis risk,
The futures position is also called the hedge or the substitute.
BASIS – Defined as the price difference between the cash commodity and the price of the futures.
Cash – Futures = Basis
When determining the basis, ask yourself where is the cash price in relation to the futures price. Is it under or over and how much. The basis reflects whether the cash is over or under the futures price.
Trends of the basis are: Strengthening, weakening, widening or narrowing
Who usually hedges?
- Importer, exporter, manufacturers
- In currencies to pay out with low value …be paid with something of higher value.
- In Financials to match maturities by hedging long term instruments with short-term instruments and vice-versa.
- When you issue, it means that you are going to sell something and then you invest it means that you are going to buy something. Want the cash price to go down.
HOW TO APPROACH?
1- When doing hedge problems you need to determine your positions in the cash market, futures market, and basis. Place yourself in the trade and ask yourself if you have the product or if you need the product. If I have it I am short the futures. If I need it I am long the futures. The cash and basis are always the same, and they are the opposite of the futures. If you are short the futures, you are therefore long the cash and long the basis. If you are long the futures, you are therefore short the cash and short the basis.
2- The Futures means the Hedge means the Substitute.
3- Start asking yourself what would you do in the future? Buy or sale, and start from here. If you remember that a producer hedge has it, therefore he is Selling or short Hedge (short the futures). When you are selling the futures you are long the basis, and as the basis becomes more positive, more going up, or strengthening you make a profit. You are also long the cash.
When working Hedging problems, we will work with basis calculation, and it is imperative that we learn how to manipulate each problem.
3 100 Thousand $60
# of Contracts Contract size Commission
Cash Futures Basis
S L S
Place
Target or Cash Price - Futures Price = Calculate!
Near date
Lift
Actual Cash Price - Futures Price = Calculate!
Far date
CHANGE Calculate! Calculate! Calculate!
Things you need to know:
1- What is the position of the cash ___ Futures ___ Basis ___
2- What is the contract size __________
3- How many contract should be hedged ______
4- What are the commissions
5- What is the target (buy/sell) price_____ and futures price____
6- What is the actual (buy/sell) price_____ and futures price ____
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