The system of fortnightly accounts is quite handy for a speculator or short-term operator in online commodity trading who buys in the hope that a price decline in the short run will bring him profit, or who sells in the hope that a price decline in the short run will bring him gains. If he buys commodities at the beginning of an account period, he does not have to pay for about a fortnight (two weeks). In the meanwhile, if the price rises he may sell the commodities before the account is closed, and book his profit. If he sells commodities at the beginning of an account period, he does not have to deliver the commodities for about a fortnight. In the meanwhile, if the price declines, he may buy the commodities before the account is closed and take his profit. What happens if the price does not rise as per the expectation of the bull operator, or the price does not fall as per the expectation of the bear operator? A bull operator is a speculator who expects that the price will move upwards in the short run. On the other hand, a bear operator is a speculator who expects that the price will fall in the short run. The commodities purchased by the bull operator are sold at the end of the current account at what is called the making-up price, and simultaneously repurchased at the same price for the next account. The bull operator pays one way commission and contango charges. The bull operator is paid the difference between the making up price and his purchase price, where the former is greater than the latter. The transaction is effectively carried to the next account period at the making up price, which is the new purchase price. The above procedure will be repeated next at the end of the following accounting period, should the bull operator want to carry forward his transaction further--this would continue until the bull operator seeks to carry forward his transaction. |
