Death comes to us all. Life's but a walking shadow | If it tracks corn then wouldn't it behave like a long futures? How does the $25 per share price correspond to a futures contract or does that matter? Let's say corn is $4 per bushel so 5000 bu is worth $20,000 for which it costs you $1000+ to margin. or 20/1. A ten percent increase in corn would be worth $2000. If you took the same $1000 margin, bought 50 shares of corn index at $20 per share and got the same 10% increase in price you would make $100.
Conversely if corn dropped just 5% you would have lost your $1000 margin or met a margin call with the futures. The stock would have supposedly declined in value by $50. but you would still have the $950 to sell.
It looks to me to have a risk/reward of 1/20th the futures.
For what it's worth. |