Futures trading is another investment option available for people who may wish to invest their money. It usually involves trading in commodities that have a delivery date on a particular time in the future. There are certain advantages and disadvantages associated with futures trading. It is important that the new investor know how this type of trading works before even trying to risk a certain amount of capital.
Future trading involves trading futures contracts. A future contract is an agreement between a producer and a buyer on a future delivery of a certain amount of produce at a certain price. The futures contract evolved when farmers of grains began setting up agreements with interested buyers for future harvests.
A farmer may offer in the market about 8000 bushels of wheat that can be delivered on a certain month of next year. There would be interested buyers who may want to maintain their wheat supply for next year and would want to buy such futures contracts to make sure. Upon an agreement on the price for the future produce, the farmer and the buyer have gone into making a futures contract.
The futures contract is well suited for both the farmer...
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