Today Orange Juice is trading in the 110's so I decided to go long (buy) 2 more Futures Contracts.
With the two initial contracts purchased at 146.15, the position is sitting with a current drawdown of $10,560. Because this is an investment, I am prepared to hold this position until it is profitable. For those of you who don't recall or haven't been following that long, the beauty of the commodities market is that unlike stocks there will always be a value to them because they are real assets.
As long as you have a full cash position on a hard asset, you can withstand price fluctuations. If a stock you own goes to zero or is delisted, it's over and your money has vaporized. Orange Juice will always have a value. The only real danger here is if there is somehow such a catastrophic collapse that even the Futures exchanges go under or your broker goes under. It is in the best interest of us all that these exchanges exist because farmers and businessmen will always have a need to offset production risk through these markets.
Anyways, since I am purchasing two more contracts today @ 110.95 each, that puts our average price at 128.55. Even if Orange Juice prices take another year to go back to our original entry of 146.15, that will be a $10,560 profit we are sitting on. Not enormous, but a profit nonetheless. Just a 10 cent move beyond that point to 156.15 would be an extra $6,000 for a total profit of $16,560 because we would have 4 contracts making $150 each for every cent in our favor.
As you can see on the chart, prices are relatively low at this point, but the market has been griding lower. We'll have to see if the fight taking place right now is won by the buyers or if we break through again and head towards the 70's and 60's. '
Keep in mind this is simulated trading and no real money is at risk here. This is to demonstrate how I could likely trade futures contracts long term to increase wealth.
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