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Home > Commodities & Futures |
Commodity Markets: Futures trading has a simple origin. In the 12th century, merchants from northern and southern Europe used to meet at trade fairs on the fields of Champagne. It was cumbersome and often dangerous to transport goods long distances so, after a while, merchants simply brought samples of their wares to sell, a buyer would be given a written promise that the sample he was interested in purchasing would be delivered in quantity at some future date. That written promise was called a “to arrive contract”. More...
The trading process: Imagine that you are the proud owner of a large breakfast cereal company. You use a lot of wheat. You know how much it will cost you to advertise your breakfast cereal, how much to pay your employees, how much to heat and light your plant. You even know, roughly, how much you can sell your breakfast cereal for because, to a large degree, your competitors determine the wholesale price for you. However, what you don't know is how much the wheat to make the breakfast cereal will cost you when you need it. Obviously, your greatest concern is that this huge variable cost will rise. More...
Risks of Futures: In a futures market, the commitment to make or take delivery must be accompanied by a quantity of cash called the margin deposit. The margin is defined as a sum for good faith, deposited to back up your commitment with evidence of financial capability. More...
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