: Three months later, a freeze in Brazil causes coffee prices to jump to $1.50 per pound.

: To ensure both parties follow through, the exchange requires them to put down margin —a small fraction of the total contract value (e.g., $50 for a micro contract vs. $500 for standard). This acts as a security deposit, not the total cost.

: Alex is "short" (he promised to sell at $1.10). Since the price is now $1.50, he is facing a loss.

If you want to start trading like the speculator in our story, follow these steps: Basics of Futures Trading | CFTC