The Saline County journal. [volume] (Salina, Kan.) 1871-1893, 1877-06-14
On Change.

is very much like the ordering OF chest
of tea at the grocery, and paying for ii
when the tea is delivered.
We premise by stating that the mean
ing of the word "optlon," as applied to
trading on Change, is not generally un-
derstood. Most people in the country
sesm to think that the person who buys
an article on option can take it or not,
as lie pleases and that the seller on OPP
ton, can deliver or not, as he pleases.
This is very wide of the truth. The man
who sells 5000 bushels of corn at so
cents, seller July, Is obliged to deliver 1t
to the buyer at some time during month,
and his opinion only extends to the choice
of the time during business hours) in
July, when he will deliver q piece of pa
per (receipO which transfers the owner
ship of the property in store and receive
for it another piece OF paper Check
which transfers the ownership of the
price-s2, 500-in the bank. If he do
not deliver it before the close of business
hours on the last day OF the month, he
defaults on his contract. 1t the buyer
does not pay for the property when ten
dered, he is the defaulting party.
Such "trade" in corn for July may
be made in May or June, several days
or weeks before the earliest time at
which the property can be delivered.
During that intervening time the market
price of corn may advance or decline
several cents per bushel. AS guaran-
tee that he will perform his part of the
contract, each party deposits 10 per cent
of the agreed price with bank which
has been approved by the board of trade;
and this deposit is called "margin."
The market may advance or decline
more than 10 per cent before the corn is
delivered, in which case tho seller or
buyer may be required to deposit an ad-
ditional sum, or margin and these mar
gins ale returned by the bank upon the
joint certificate of the two parties that
the contract has been fulfilled.
Either party to the contract may, be-
fore its expiration, asked the other party
to "settle," and, if the two can agree
upon terms, ono pays the other the "dif.
ference between the original price and
the price then current. The trade is
then said to be Settled" but this can
only be done by second bargain be-
tween the buyer and seller. In the alb
sencc of such after agreement the prop
erty must be delivered according to the
term of the original contract. The rules
of the board OF trade do not provide for
anything other than the actual delivery
of the property within the time specified;
except as they take cognizanco of de
90, ,l,u 70 Il ,,li,,,,. to "A
for the same.
Contracts arc not often settled in this
way. In the great majority Of cases,
however, tho delivery IS "proviGed for.
That is the buyer has no use for the prop
erty; he neither wants to grind the corn
nor to ship it. lie buys because he
hopes the price will advance, SO that he
can sell at profit. He carries the deal
till satisfied with the profit made, or till
afraid Of risking further loss, and then
sells. When the corn is delivered to him
in July be delivers it to the third party, |
and his profit or loss is the difference
between Tic money he pays for the corn !
and the amount no receives for it. In |
like manner tho seller may sell the corn
without actually owning it at the time,
but because he expects to be able to buy
it at less price before the maturity of
tho contract. lie buys in the corn sub
and delivers it as soon as pos
sibe after receiving it; the difference of
the selling and buying prices being his
profit or loss, rs the case may be.
Very much of this trading is done on .
account of outside parties. MIR. A., in
the country, thinks corn will advance,
and tclegrahs Mr. B., the commission
on change, to "buy five corn
for July" If the market price be 80
cents per bushel, and Mr. b is a prudent
man, he will require A to send $500 90
per cent. to be deposited rs margin,
because bic knows that he will be requir-
ed to take the corn and pay for it in July,
A wishes it or not, unless he
can previously effect settlement. B
buys the corn from G. If the price ad- L
vance, say to sc cents, A may order his
corn sold b sells it to ID, and sends A
the 9 cents per bushel, latter subtracting il
his commission charges. A has no in
terest in the question whether or not c
or ID Will perform the contract with B
at maturity. Suppose the market DE-
clines to 10 cents before A orders the
corn to be resold. In that case the mar
gin is exhausted, and B calls on A for
more money to protect the trade, be-
cause q will call on b to protect the con-
tract IN the same way.
II A thinks corn will decline, nc may ,
order b to sell for delivery in July. He {
may order b to either buy or sell wheat, |
pork, lard, or oats instead of corn, and
10 make the transaction for any other
month than July,or for the whole OF the
,arrcnt year, il he wishes. The princi- |
pie is The same in all cases. A contract !
S madc to receive or deliver, at a certain ,
price, certain quantity of a FAMED ar +,
-icle at some time in tho future, and a ,
sum Of money is deposited as security
hat the person making the trade will I
perform his part of the contract within 9
he time named for its performance.
Another point generally lost sight of :
BY parties outside the board, is the fact I
hat prices advance or decline as the ,
number of buyers or sellers preponder. j
ties. The news that Russia has deter '
mined to make war on Turkey is flashed $
'ver the continent, and 500 men think $
that it is good time TO a