The futures market offers the opportunistic investor the option of using small amounts of their own money to control large amounts of products, including gold, currencies, and agricultural commodities.
A futures contract is a legally binding contract to deliver, if you are selling, or to take delivery, if you are buying, of a specific commodity, index, bond, or currency at a predetermined date or price. A futures contract can include everything from a standard size amount of wheat, oil, or a country’s currency. The amount and date of delivery of the contract are specified, though in almost all cases delivery is not taken as contracts are bought and sold for speculative or hedging purposes.
Futures are utilized by both those who use the actual commodity and by investors. For example, in May a farmer plants some corn, but doesn’t know what corn will be selling for in November. He can sell a futures contract for November and “lock in” the future selling price today. On the other hand investors can buy a futures contract if they believe the price of a security is going to appreciate, or they can sell a futures contract if they believe the price...
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