Lean Hogs Contract Value

Discussion in 'Financial Futures' started by Harry, Mar 5, 2004.

  1. Harry


    Sorry for this beginner question - most futures on the CME show up with a $-contract value in the contracts specifications ...

    Can somebody help me: whats's the contract value in USD for Lean Hogs?

    Contract Value is also the theretical amount to invest if I do not want to use any leverage, right?

    Thanks a lot,
  2. EBOAH


    1 cent = $400
    contract size = 40,000 lbs
    contract value= 40,000 x price (apr. contract = 60.48cents/lbs.)=$24,192
  3. Diode



    - tick value = $0.00025/lb = $10.00
    - daily limit = $0.02/lb = $800.00

    If you're going long and don't want to use any leverage, then the contract value is indeed the amount you would want to use for your performance margin. If you're going short, it's not a particularly useful calculation.

    (I understand Jim Rogers recently started a commodity fund that is long-only and totally unleveraged, which is a bit of a turnaround since in the early days of the Quantum Fund, he and Soros were always "leveraged to the hilt" as well as playing both the long and short sides.)
  4. Harry


    EBOAH - thanks for the quick answer - but I still don't get it :(

    Where do you need the multiplier of $400

    You just seem to take the contract size = 40.000 x price 60 = 24,000

    For Soybeans this would be 5,000 x 9.34 = 46,700 ???
    Where do I need the multiplier of $50 ???

    Thanks again for any help,
  5. Harry


    Or is it $50 x 934 = 46,700 - where do I need the contract size then ?
  6. Diode


    I should let EBOAH answer this as you directed the question to him, but:

    Prices on commodities are often quoted in CENTS, not dollars. For example, I'm looking at a quote of 60.9 for today's opening price for the April 04 lean hog contract. To get contract value you would multiply that figure by $400, not $40000. Similar logic for your soybean example.

    If your price is in DOLLARS rather than cents, then use the larger multiplier.

    Hope that helps.
  7. Harry


    Diode, I didn't see your answer when replying to EBOAH - sorry for that!

    When I go to the CBOT-Website I get for Soybeans:

    last price = 932
    contract size = 5,000 bu
    Tick = 1/4 cent = $12,50/cent/bu

    And how do I come up with a contract value with all these three numbers :confused: - sorry :(

    Thanks a lot for all your explanations!
  8. EBOAH


    It's a very simple concept.

    Contract Size X Price = Contract Value
  9. Diode



    It would be easier for those of us learning the game if all prices were in dollars, wouldn't it? But it's not all that surprising that commodities which have been traded by guys shouting at each other in a pit for the past hundred years are still quoted in cents.

    Anyway: the soybean price (932) is in cents. My physics teachers taught us to carry the units thruout the calculation to avoid errors ("dimensional analysis"), so:

    ($9.32 per bushel) times (5000 bu. per contract) = $46600.00 per contract

    ($0.0025 per bu. per tick) times (5000 bu. per contract) = $12.50 per tick per contract

    Using a multiplier of 50 for the price in cents is a useful shortcut, and if you were a floor trader you would quickly adopt that way of thinking.
  10. Harry


    Thank you both so much! I just was so confused since I do not need the multiplier here ...

    #10     Mar 5, 2004