Example: Losing Money

The FDA does not approve the drug XYZ. The market closing price is $20.00. BigLo$er purchased the following contracts for the trial:

Amount: $30
Quantity: 100 Contracts
Total Investment: $3,000

The price BigLo$er paid was greater than the market closing price (he was more confident than the market). Therefore, BigLo$er forfeits the total investment and must pay a penalty for over-estimating the market.

Total Investment: $3000
Difference between purchase price and market closing price: $-10.00 ($20.00 - 30.00)
Penalty: $-1,000 ($-10.00 X 100 Contracts)
Total Amount Lost: $4,000

Example: Earning Money