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RE: Crude oil for idiots - continued

in Project HOPE6 years ago

Aha. Imagine, if you wanted to sell a contract(CFD, without physical product delivery), I buy from you now at $17. If the price really go down to $1, me as a broker will have to sell it back to you at $1, so I loss $16. What a shame. That's me, as a broker with downside.

On the other hand, at the same time when you sold me $17, someone wanted to buy. So I sold the contract for $18 to that someone. By the time it dropped to $1, that someone who owns the oil couldn't take it anymore, so they decided to sell it back to me. I offer them, ok I will only take it back at $0.50. Now I have a profit of $18-$0.50=$17.50

My total revenue for this entire transaction is:
Sales contract between you and me -$16
Buy contract between me and someone +$17.50
Total profit $1.50

Now do you see why broker will never go broke?

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