- 5 -
behalf of petitioners by Hunter. Petitioners did not engage in
the transactions as dealers.
Trading in Commodities Futures in General
A gold futures contract1 is an agreement to either deliver
(a short position2) or receive (a long position3) a specified
amount of gold during a designated month at a price negotiated
when the contract is made. The futures contract is ultimately
fulfilled when the commodity bought is delivered to the buyer by
the seller or when the contract is offset. Less then 5 percent
of all futures contracts actually result in the delivery of the
underlying commodity. Instead, most futures contracts are offset
rather than being executed by delivery. Ewing v. Commissioner,
supra at 400. An offset is the acquisition of an offsetting
contract of purchase or sale of the same quantity of the
commodity.
A gold spread consists of a long position and a short
position, with each position having a different delivery date.
Each of the two positions constitutes a simple spread, often
1Since modern gold futures trading began in 1974, gold
futures have been traded on four domestic exchanges: (1) The
Chicago Board of Trade (CBOE); (2) the International Monetary
Market (IMM), which is associated with the Chicago Mercantile
Exchange; (3) the Commodity Exchange, Inc. (COMEX), and (4) the
MidAmerica Commodity Exchange. The dominant exchange is COMEX.
2 A short position is held by a person who has sold one or
more futures contracts without having previously bought them.
3A long position is held by a person who has bought and
holds one or more futures contracts.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011