The all-in cost of one commodity trade

This module priced six things separately. A trade pays them together, and the assembly is the lesson.

One position, itemised

Take the module's running example: a one-contract WTI CFD long, held a month. The spread cost $30 on the way in. Financing ran twenty nights at $8 - $160. The monthly roll took $600 at the worked curve. Total, before slippage: $790 a month, on a position whose owner would have told you the oil price was the only thing that mattered. Against an $80,000 notional that is roughly one per cent a month of standing cost - a hurdle the trade idea must clear before it earns its first honest dollar.

The shape of the bill depends on the trade

• Scalps pay spread and slippage, almost nothing else. Their enemy is lesson 2.
• Month-long CFD holds pay financing and the roll. Their enemy is lessons 3 and 5, and the entry spread is a rounding error.
• Direct futures positions pay commission and the roll, run no nightly meter, and tie up margin that costs nothing but its idleness - lesson 4, kept clean.

The pre-trade habit

Before any commodity trade, write four numbers: spread at your size and hour; financing or roll for your holding period; the fee stack per round turn; and your measured slippage rate. Add them. If the sum is not small against the trade's target, the trade is not what it appeared - and no amount of being right about the commodity fixes a cost structure that was wrong for the idea. Module 4 takes this number and builds risk management on top of it.