Buy Futures Contract Example ◆

The manufacturer buys one corn futures contract (covering 5,000 bushels) at the current futures price of $5.00 per bushel .

Imagine a cereal manufacturer that needs 5,000 bushels of corn in three months. They fear corn prices will rise, which would hurt their profit margins. buy futures contract example

If corn drops to $4.00, they are still obligated to pay the contract price of $5.00. While they lose money on the contract, they benefit from lower costs in the physical market, "locking in" their budget. Buying Example: The Individual Trader (Speculation) The manufacturer buys one corn futures contract (covering

Every contract specifies the exact quantity and quality of the asset (e.g., one crude oil contract covers 1,000 barrels). If corn drops to $4

Profits and losses are calculated and settled in your account at the end of every trading day.