Daily Price Limits

Commodity Exchanges establish a daily price limit for trading in futures market contracts. The limit is stated in terms of the previous day's closing price plus and minus so many cents or dollars per contract unit. Once a futures price has increased by its daily limit, trading at any higher price cannot take place until the next day of trading. Conversely, once a price has declined by its daily limit, trading also cannot take place until the next day of trading. Thus, if the daily limit price for a particular grain is currently 10 cents a bushel and the previous day's settlement price was $4.00, there can not be trading during the current day at any price below $3.90 or above $4.10. The price is allowed to increase or decrease by the limit amount each day.

Commodity contracts, during the month in which the contract expires, the daily price limits are eliminated. Commodity prices can become particularly volatile during the month of expiration, known as the "delivery" or "spot" month. Traders lacking experience in futures trading may wish to liquidate their positions prior to that time. Cautiously trade with an understanding of the risks which are involved. The daily price limit set by the exchanges are always subject to change. Limits can be increased once the market price has increased or decreased by the existing limit for a given number of successive days. Because of these daily price limits, there may be occasions when it is not possible to liquidate or exit an existing futures position at will. In this event, possible alternative strategies should be discussed with a commodity broker.

 Price Changes                      Commodity Futures Menu                      Position Limits 

Information is believed to be reliable and is provided 'as is' without warranty.