If one were to look at the history of selling and buying of commodities, then you would see that the idea of trading in futures has been pretty much going on since the concept of trading in goods and produce in agricultural goods began. Farmers would get advance payment on their crops or cattle produce from merchants on the guarantee of delivery of the goods.
This is basically what happens in today’s futures markets as well. There are two kinds of players in the futures market. They are called hedgers and speculators. Hedgers are those who have an actual interest in buying the actual commodity that is being traded. They have an interest in seeing that there are no possibilities of great changes in price of these commodities. They will thus seek to hedge out other players in order to maintain the prices to their benefit, since they are usually the producers or consumers of the said commodity.
Speculators tend to play the futures market for the profit they can gain out of predicting the movement in of the markets. They have no real interest in buying or selling the commodities for use; instead they buy the commodity ‘on paper’ and sell it for profit.
A futures contract is traded on the futures market. It is a standardized contract that is used to buy or sell an underlying instrument x96 this being the derivative of an asset, which is usually bonds or commodities x96 at a date in the future at a price fixed on the last day of trade.
Whereas before, futures trading usually happened through brokers, now almost anyone can speculate on the futures market with just a computer and Internet access. There are a number of sites that offer the opportunity to trade in futures online. They have developed special interfaces in order to keep track of prices, fluctuations in the stock market and the waxing and waning of demand.
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