656 Part V: Index Options and Futures 
gains and losses are taken into account as well as are realized ones. If his account 
loses money, he must add cash into the account or sell out some of his Treasury bills 
in order to cover the loss, on a daily basis. However, if he makes money, that unreal­
ized profit is available to be withdrawn or used for another investment. 
Example: The cotton speculator from the previous example sees the price of the 
March cotton futures contract he owns fall from 60.00 to 59.20 on the first day he 
owns it. This means there is a $400 unrealized loss in his account, since his holding 
went down in price by 0.80 cents and a one-cent move is worth $500. He must add 
$400 to his account, or sell out $400 worth of T-bills. 
The next day, rumors of a drought in the growing areas send cotton prices much 
higher. The March future closes at 60.90, up 1.70 from the previous day's close. That 
represents a gain of $850 on the day. The entire $850 could be withdrawn, or used as 
initial margin for another futures contract, or transferred to one's stock market 
account to be used to purchase another investment there. 
Without speculators, a futures contract would not be successful, for the specu­
lators provide liquidity. Volatility attracts speculators. If the contract is not trading 
and open interest is small, the contract may be delisted. The various futures 
exchanges can delist futures just as stocks can be delisted by the New York Stock 
Exchange. However, when stocks are delisted, they merely trade over-the-counter, 
since the corporation itself still exists. When futures are delisted, they disappear -
there is no over-the-counter futures market. Futures exchanges are generally more 
aggressive in listing new products, and delisting them if necessary, than are stock 
exchanges. 
TERMS 
Futures contracts have certain standardized terms associated with them. However, 
trading in each separate commodity is like trading an entirely different product. The 
standardized terms for soybeans are completely different from those for cocoa, for 
example, as might well be expected. The size of the contract (50,000 pounds in the 
cotton example) is often based on the historical size of a commodity delivered to 
market; at other times it is merely a contrived number ($100,000 face amount of U.S. 
Treasury bonds, for example). 
Also, futures contracts have expiration dates. For some commodities (for exam­
ple, crude oil and its products, heating oil and unleaded gasoline), there is a futures 
contract for every month of the year. Other commodities may have expirations in only 
5 or 6 calendar months of the year. These items are listed along with the quotes in a 
good financial newspaper, so they are not difficult to discover.