Year: 1877

A correspondent asks us to give
him some information about the way
in which Board d-of- Trade operators,
and others, trade in produce in this
city. We presume herefers to what
are often called "options," as the
buying or selling of grain or provi-
sions for present delivery is very
much like the ordering of chest of
tea at the grocery, and paying for it
when the tea is delivered.


We premise by stating that the
meaning of the word "option'' as
applied to trading on Change, is not
generally understood. Most people
in the country seem to think that the
person who buys an article on op-
ton can take it or not, as he pleases;
and that the seller on option can de-
liver or not, as he pleases. This is
very wide of the truth. The man
who sells 5000 bushels of corn at 50
cents, seller July, is obliged to deliv-
er it to the buyer at some time dur
ing that month, and his option only
extends to the choice of the time
during business hours) in July,
when he will deliver piece of pa
per (receip) which transfers the
ownership of the property in store,
and receive for it another piece of
paper (check) which transfers the
ownership of the price-$2, 5oo-in
the bank. If he does not deliver it
before the close of business hours on
the last day Of the month, he defaults
on his contract. If the buyer does
not pay for the property when tend
cred, he is the defaulting party.


Such ''trade" in corn for July
may be made in May or June, sew
eral days or weeks before the earli-
est time at which the property can
| be delivered. During thatinterven-
ing time the market price of corn
may advance or decline several cents
per bushel. AS guarantee 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 a
E'margin." The market may adj
vance or decline more than 10 pei
cent before the corn is delivered, in
which case the seller or buyer may
be required to deposit an additional
sum, or margin; and these margins
are returned by the bank upon the
Joint certificate of the two parties
that the contract has been fulfilled.


Either party to the contract may,
before its expiration, ask the other
party to ''settle;'' and if the two can
agree upon terms, one pays to the
other the ''difference between the Or
iglnal price, and the price then cur
rent. The trade is then said to be
"settled;" but this can only be done
by second bargain between the
buyer and seller. In the absence OF
such, after agreement the property
must be delivered according to the
terms of the original contract. The
rules of the Board of Trade do not
provide for anything other than the
actual delivery of the property with
IN the time specified; except as they
take cognizance of defaults to deliv-
er or to receive and pay for the same.
| Contracts are not often settled in
this way. In the great majority OF
cases, however, the delivery is s'pro-
vided for" That is, the buyer has
no use for the property; he neither
wants to grind the corn nor ship it.
He buys because he hopes the price
will advance, SO that he can sell at a
profit. He carries the deal till salts
fed with the profit made, or till
afraid Of risking further loss, and
then sells. When the corn is deliv-
cred to him in July, he delivers it to
the third party, and his profit or loss
is the difference between the money
he pays for the corn and the amount
he receives for it. In like manner
the seller may sell the corn without
actually owing it at the time, but
because he expects to be able to buy
it at less price before the maturity
Ofthe contract. He buys in the corn
subsequently, and delivers it as soon
as possible after receiving it; the diff
ference of the selling and buying
prices being his profit or loss, as the
case may be.


Very much Of this trading is done
on account OF outside parties. Mr..
A, in the country, thinks corn will
advance, and telegraphs Mr.. B, COM
mission-merchant on Change to
'sbuy 5000 bushels corn for July"
If the market price be 50 cents per
bushel, and Mr.. B is a prudent man,
he will require A to send $500 10
per cent? to be deposited as mar
gin, because he knows that he will
be required to take the corn and pay
for it in Jnly, whether A wishes it
or not, unless he can previously eff
| feet a settlement r h,1yc +Io co-,,