Assume in December a speculator buys two May wheat contracts at 624’0 ($6.24 per bushel). The margin requirement for each is $1,700, and the contract size is 5,000 bushels. Sometime later the contract is quoted at 645’0 ($6.45 per bushel). The gain is $0.21 5000 2 $2,100. The rate of return on the speculator’s actual cash outlay (the total margin requirement) is

($64,500 - $62,400 / $3,400 = 61.8%

This high return was achieved because the price of wheat rose, and futures contracts have a lot of leverage. Note that the total margin requirement of $3,400 is only 5.4 percent of the original value of the two wheat contracts. Of course, there is always a downside. Had wheat prices declined, the entire margin could have been lost.