Share

Tweet this

Dealing Desk Hotline

(603)-2181 8848

Monetizing Gold Futures to Take Advantage of Gold Price Volatility

Investing in gold futures can cater to a variety of traders and investors with different trading objectives and strategies. The three (3) scenarios where gold futures contract can be used are protection of asset value, locking in the price of physical gold before it goes up or even taking advantage of gold price volatility.

How can BMD Gold Futures(FGLD) help you to take advantage of gold price volatility?

In the following scenario, we look at one example of taking advantage of gold price volatility by using gold futures.

Suhaila is interested to have gold as an asset class in her investment portfolio. She observes that gold prices have been volatile recently, moving actively in both directions. She believes she can profit from the price fluctuations. To benefit from the volatile market, she can use FGLD contract in the following manner:

Quantity of Gold: 100g
Current Gold Price: MYR 130 per gram

Scenario A

This is a scenario when the physical gold prices are expected to RISE

STEP 1:

Buy one FGLD contract at MYR 130
Assuming gold prices rise to MYR 150 per gram

 

STEP 2:

Sell one FGLD contract at MYR 150
Gross profit on FGLD: MYR 2,000*
(MYR 20 x 100 grams)

 

Scenario B

This is a scenario when the physical gold prices are expected to FALL

STEP 1:

Sell one FGLD contract at MYR 130
Assuming gold prices fall to MYR 100 per gram

 

STEP 2:

Buy one FGLD contract at MYR 100
Gross profit on FGLD: MYR 3,000*
(MYR 30 x 100 grams)

 

By using the above example, Suhaila can use numerous strategies to maximise her trading opportunities in the market, for e.g. spread trading, arbitrage trading and outright trading.

* Initial Margins are to be deposited prior to trading
* Transaction costs have been excluded in this example

Text Source: Bursa Malaysia

OTHER RECOMMENDED READING:






Share and Enjoy:
[del.icio.us] [Digg] [Facebook] [Google] [Mixx] [MySpace] [Twitter] [Windows Live] [Yahoo!] [Email]

Post a Comment

Displayed next to your comments.

Not displayed publicly

If you have a website, link ti it here

PLEASE NOTE:

OPF reserves the right to delete comments that are snarky, offensive, or off-topic. If in doubt, read our Comments Policy.


SiteLock