What is Futures Contract?

A futures contract is a legally binding standardized agreement between two parties to buy or sell a predetermined amount of a commodity, such as corn, during a specified month in the future (the delivery

month) at a price (the future price) which is determined at the time the contract is established.

Where Are Futures Contracts Traded?

Futures contracts (as well as options on futures contracts) are traded at 11 different commodity exchanges in the U.S. as well as abroad. Futures contracts on the major domestic agricultural crops are traded at the Chicago Board of Trade (CBOT), the Kansas City Board of Trade, the Minneapolis Grain Exchange, the New York Cotton Exchange and the Coffee, Sugar and Cocoa Exchange.

What Benefits Are Gained From Buying and Selling Futures Contracts?

One of the most important benefits gained from trading in the futures market is that traders can assume any of a wide range of commodities or other assets with a relatively small initial investment. The initial investment includes a commission of approximately $50 per contract and a margin. A margin is a good faith deposit. When a trader assumes a futures position, he or she locks in a price for future delivery for the underlying commodity. This fixed price is the future price at which the contract is bought or sold. Subsequently, as the price of the actual commodity rises or falls, the futures price follows suit, making or losing money. A benefit derived from selling futures contracts is that it enables the trader to establish, in advance, an approximate price for crops he or she intends to harvest and market at some future time. This provides protection against dangerous price swings, and enables speculators to profit from market fluctuations. Speculators are market participants who have absolutely no interest in owning or selling a physical commodity, but have the money to take on risk -- buying and selling futures contracts in hopes of making a profit.

What Is a Hedge?

A hedge is the buying or selling of a futures contract for protection against the possibility of a price change in the physical commodity that the trader is planning to buy or sell.  There are two types of hedges: a long hedge and a short hedge. A short hedge is the selling of a futures contract to protect the sale price of a commodity the trader is planning to sell. A long hedge is the buying of a futures contract to protect the purchase price of a commodity the trader is planning to buy. Most traders are able to liquidate or offset contracts prior to delivery. The long trader can offset a futures contract by subsequently purchasing a contract with the same delivery month. While most contracts entered into do not result in delivery, the threat of delivery still tends to serve the purpose of keeping the prices of futures contracts and their underlying cash market in reasonable alignment with one another. The cash market is where physical commodities are bought and sold.

When Should Traders Hedge?

In order to successfully hedge, producers must first determine what target price they need to cover cost of production to make a reasonable profit. Using cost of production figures and devising a reasonable profit margin, producers can establish their target price range. The target price range should be viewed as a goal that may or may not be obtained during the market year.

An Example of the Short Hedging Process

A producer decides to explore a variety of marketing alternatives, including futures, rather than settle for whatever the local elevator is willing to pay at harvest time. The producer's ultimate goal is to improve his or her bottom line. The producer estimates it will cost $2 to produce one bushel of corn. Once the producer sees corn prices in a range where a profit can be made, he or she decides to hedge a portion of the crop by selling 1 CBOT December corn futures contract. The standard contract size for 1 CBOT corn futures contract equals 5,000 bushels.

By early May, CBOT December futures hit $2.60 a bushel. To lock in a selling price of $2.60, the producer sells 1 CBOT December corn futures contract. As it turns out, the Midwest experienced a bumper crop year. Corn yields were above normal, causing prices to drop. By harvest, corn prices fell to $1.90 a bushel. The producer offsets his/hers futures position by purchasing 1 CBOT December corn futures contract. The result of the producer's hedging activities were:

Cash Market	Futures Market
May: Plans to sell 5,000 bushels of corn; sells 1 CBOT December corn	Sells 1 CBOT December corn futures contract @ $2.60/bu
October: Sells 5,000 bushels of corn in the cash market @ $1.90/bu	Buys 1 CBOT December corn futures contract @ $1.90/bu
Sales price of corn	$1.90/bu
Plus futures gain ($2.60 - $1.90)	$0.70/bu
Net sale price	$2.60/bu

By using CBOT corn futures, the producer increased the final sales price from $1.90 to $2.60 a bushel. The producer accomplished his or her goal. Better yet, the final sale was 60 cents a bushel higher than production expenses.

Mention of product names or firms does not necessarily constitute endorsement by the Risk Management Agency or the U.S. Department of Agriculture over others not mentioned, and is for information purposes only.

Futures Margin requirments

Symbol	Spread	1 lot value	Commission per standard lot	Margin requirement per standard lot
#CL	50	1000 Barrel	15 $	2500$
#NG	4	10000 MMBtu	15 $	5000$

Futures Trading Date

Symbol	Description	Start trading day	Closing open position	Expiration Date
#CLF0	Light, Sweet Crude Oil Futures January 10	18.11.2009	17.12.2009	21.12.2009
#CLG0	Light, Sweet Crude Oil Futures February 10	17.12.2009	18.01.2010	20.01.2010
#CLH0	Light, Sweet Crude Oil Futures March 10	18.01.2010	18.02.2010	22.02.2010
#CLJ0	Light, Sweet Crude Oil Futures April 10	18.02.2010	18.03.2010	22.03.2010
#CLK0	Light, Sweet Crude Oil Futures May 10	18.03.2010	16.04.2010	20.04.2010
#CLM0	Light, Sweet Crude Oil Futures June 10	16.04.2010	18.05.2010	20.05.2010
#CLN0	Light, Sweet Crude Oil Futures July 10	18.05.2010	18.06.2010	22.06.2010
#CLQ0	Light, Sweet Crude Oil Futures August 10	18.06.2010	16.07.2010	20.07.2010
#CLU0	Light, Sweet Crude Oil Futures September 10	16.07.2010	18.08.2010	20.08.2010
#CLV0	Light, Sweet Crude Oil Futures October 10	18.08.2010	17.10.2010	21.10.2010
#CLX0	Light, Sweet Crude Oil Futures November 10	17.10.2010	18.10.2010	20.10.2010
#CLZ0	Light, Sweet Crude Oil Futures December 10	18.10.2010	17.11.2010	19.11.2010
#CLF1	Light, Sweet Crude Oil Futures January 11	17.11.2010	16.12.2010	20.12.2010

*From 23.00 Vinson Financials' server time to 22:15 (break each day from 22:15 to  23:00 next trade date )

Natural Gas( #NG)

Symbol	Description	Start trading day	Closing open position	Expiration Date
#NGF0	Natural Gas Futures January 10	23.11.2009	24.12.2009	26.12.2009
#NGG0	Natural Gas Futures February 10	24.12.2008	25.01.2010	27.01.2010
#NGH0	Natural Gas Futures March 10	25.01.2010	22.02.2010	24.02.2010
#NGJ0	Natural Gas Futures April 10	22.02.2010	25.03.2010	29.03.2010
#NGK0	Natural Gas Futures May 10	25.03.2010	26.04.2010	28.04.2010
#NGM0	Natural Gas Futures June 10	26.04.2010	24.05.2010	26.05.2010
#NGN0	Natural Gas Futures July 10	24.05.2010	24.06.2010	28.06.2010
#NGQ0	Natural Gas Futures August 10	24.06.2010	26.07.2010	28.07.2010
#NGU0	Natural Gas Futures September 10	26.07.2010	25.08.2010	27.08.2010
#NGV0	Natural Gas Futures October 10	25.08.2010	24.9.2010	28.9.2010
#NGX0	Natural Gas Futures November 10	24.9.2010	25.10.2010	27.10.2010
#NGZ0	Natural Gas Futures December 10	25.10.2010	22.11.2010	24.11.2010
#NGF1	Natural Gas Futures January 11	22.11.2010	24.12.2010	28.12.2010

*From 23.00 Vinson Financials' server time to 22:15 (break each day from 22:15 to  23:00 next trade date )

_______________________________________

Trading Unit

1,000 U.S. barrels (42,000 gallons).

Price Quotation

U.S. dollars and cents per barrel.

Trading Hours (All times are New York time)

Open outcry trading is conducted from 9:00 AM until 2:30 PM.

Electronic trading is conducted from 6:00 PM until 5:15 PM via the CME Globex® trading platform, Sunday through Friday. There is a 45-minute break each day between 5:15PM (current trade date) and 6:00 PM (next trade date).

Trading Months

Crude oil futures are listed nine years forward using the following listing schedule: consecutive months are listed for the current year and the next five years; in addition, the June and December contract months are listed beyond the sixth year. Additional months will be added on an annual basis after the December contract expires, so that an additional June and December contract would be added nine years forward, and the consecutive months in the sixth calendar year will be filled in.

Additionally, trading can be executed at an average differential to the previous day's settlement prices for periods of two to 30 consecutive months in a single transaction. These calendar strips are executed during open outcry trading hours.

Trading at Settlement (TAS)

Trading at settlement is available for the front two months except on the last trading day and is subject to the existing TAS rules. Trading in all TAS products will cease daily at 2:30 PM Eastern Time. The TAS products will trade off of a "Base Price" of 100 to create a differential (plus or minus) in points off settlement in the underlying cleared product on a 1 to 1 basis. A trade done at the Base Price of 100 will correspond to a "traditional" TAS trade which will clear exactly at the final settlement price of the day.

Minimum Price Fluctuation

$0.01 (1¢) per barrel ($10.00 per contract).

Maximum Daily Price Fluctuation

$10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.

Last Trading Day

Trading terminates at the close of business on the third business day prior to the 25th calendar day of the month preceding the delivery month. If the 25th calendar day of the month is a non-business day, trading shall cease on the third business day prior to the business day preceding the 25th calendar day.

Settlement Type

Physical.

Delivery

F.O.B. seller's facility, Cushing, Oklahoma, at any pipeline or storage facility with pipeline access to TEPPCO, Cushing storage, or Equilon Pipeline Co., by in-tank transfer, in-line transfer, book-out, or inter-facility transfer (pumpover).

Complete delivery rules and provisions are detailed in Chapter 200 of the Exchange Rulebook.

Delivery Period

All deliveries are ratable over the course of the month and must be initiated on or after the first calendar day and completed by the last calendar day of the delivery month.

Alternate Delivery Procedure (ADP)

An alternate delivery procedure is available to buyers and sellers who have been matched by the Exchange subsequent to the termination of trading in the spot month contract. If buyer and seller agree to consummate delivery under terms different from those prescribed in the contract specifications, they may proceed on that basis after submitting a notice of their intention to the Exchange.

Exchange of Futures for Physicals (EFP)

The commercial buyer or seller may exchange a futures position for a physical position of equal quantity by submitting a notice to the Exchange. EFPs may be used to either initiate or liquidate a futures position.

Deliverable Grades

Specific domestic crudes with 0.42% sulfur by weight or less, not less than 37° API gravity nor more than 42° API gravity. The following domestic crude streams are deliverable: West Texas Intermediate, Low Sweet Mix, New Mexican Sweet, North Texas Sweet, Oklahoma Sweet, South Texas Sweet.

Specific foreign crudes of not less than 34° API nor more than 42° API. The following foreign streams are deliverable: U.K. Brent, for which the seller shall receive a 30 cent per barrel discount below the final settlement price; Norwegian Oseberg Blend is delivered at a 55¢–per–barrel discount; Nigerian Bonny Light, Qua Iboe, and Colombian Cusiana are delivered at 15¢ premiums.

Inspection

Inspection shall be conducted in accordance with pipeline practices. A buyer or seller may appoint an inspector to inspect the quality of oil delivered. However, the buyer or seller who requests the inspection will bear its costs and will notify the other party of the transaction that the inspection will occur.

Position Accountability Levels and Limits

Any one month/all months: 20,000 net futures, but not to exceed 3,000 contracts in the last three days of trading in the spot month.

Margin Requirements

Margins are required for open futures positions.

Trading Symbol

CL
CLT (TAS Code)