When to hedge By knowing the enterprise cost of production, Joe can determine prices at which he might consider forward pricing portions of his production. Thus, it is imperative that producers know their cost of production when hedging a commodity. It is important that producers determine a target profit margin, because people tend to price at the market high. Commissions are paid to a broker for administrative costs and for operation and regulation of the futures exchange. Margin money is paid only on futures positions and not options positions.
Margin refers to earnest money placed in a brokerage account to cover potential losses.
The initial margin is needed to start trading. The exact percentage is determined by the futures exchange. The maintenance margin is used to step up the initial margin account. There is no maximum number of times a margin call can occur. This guide is also available in Portable Document Format.