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the Miami law firm of Paul & Thomson, accountants at Peat Marwick,
and a private investigator to investigate Mr. Illingworth’s
background. The reports petitioner received confirmed what Mr.
Illingworth had stated to be his background and convinced
petitioner that Mr. Illingworth had expertise in commodities
trading.
Petitioner also consulted with accountants at Peat Marwick
regarding the tax ramifications of establishing and operating a
partnership with Mr. Illingworth.
Trading Terminology
Trading in commodity futures contracts involves tremendous
leverage and thus the potential for large gains or losses. A
“futures” contract is a forward instrument (having a long side and
a short side) with respect to an underlying commodity. The
contract represents a commitment to deliver (sell) or receive (buy)
a specified quantity of a commodity at a specified price at a
specified date in the future. At the expiration of the specified
time (which is referred to by the specified month), a trader
holding a short futures contract (a contract to sell the commodity)
must deliver the underlying commodity to the holder of the
corresponding long contract at the specified price. A trader
holding a long futures contract (a contract to buy the commodity)
can compel the holder of the corresponding short contract to
deliver the underlying commodity. Less than 5 percent of all
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