I have little knowledge about futures contracts. The recent negative price of crude oil spurred my curiosity about this stuff.
I read this post about buying/selling futures contracts. According to this post, when I buy a futures contract, I enter into a contractual agreement to buy some commodity on some future date, and I only need to pay a 2% initial margin.
Suppose the price of the commodity does not fluctuate but I change my mind and decide not to buy the commodity at maturity. What punishment could be exerted on me?
I do not want the 2% initial margin back because that is a little money compared to the real value of the commodity. If there is no extra penalty, it would be unfair for the seller — imagine the seller transports 1000 barrels of crude oil to your front door and you say "I do not need it any more, please take it away, thank you!"
Update: I did more research about this and have more questions.
If I buy a futures contract at $10 and the price of the contract drops to -$37 at the last trading day, at which price should I buy the commodity at the delivery day, $10 or -$37?
There seems not just one contract I enter into when I buy a futures contract: the original futures contract between me and the seller of the commodity(or the exchange?), the contract between me and my brokerage, the contract between the brokerage and the exchange. I'm not clear about the exact entities of each contract and the obligations involved in each contract. The contracts seem contradictory with each other, e.g., my brokerage may forcefully sell my futures contract if my account balance is not enough, which will prevent me from fulfilling the obligations in the futures contract, i.e., receiving the commodity on future date.
If I(or an institutional trader) trade directly (not via a brokerage) with an exchange(does CME accept individual traders?), does the exchange have the rights to forcefully sell my contracts at the last trading day at any price or close my position at the settlement price(say -$37)? If the exchange does so thus letting me own $5,000M to it, is it more justice for me to sue the exchange rather than let the exchange sue me? If I could hold the position, the loss caused by my not executing the delivery/receipt of the commodity may be less than $5,000M. Of course, the loss will be determined by the court, not by the exchange according to the settlement price formed by itself or a few possible conspirators.