How To Buy Commodity Futures 💫

: Sarah and Alex enter a futures contract through a regulated exchange. They agree on a price of $1.10 per pound for delivery in six months.

: Alex is "short" (he promised to sell at $1.10). Since the price is now $1.50, he is facing a loss.

: Three months later, a freeze in Brazil causes coffee prices to jump to $1.50 per pound. how to buy commodity futures

: Her contract at $1.10 is now very valuable because she "locked in" a lower price.

Basics of Futures Trading * A commodity futures contract is an agreement to buy or sell a particular commodity at a future date. * Commodity Futures Trading Commission | CFTC (.gov) How To Invest In Commodity Futures - SmartAsset : Sarah and Alex enter a futures contract

If you want to start trading like the speculator in our story, follow these steps: Basics of Futures Trading | CFTC

: Alex pays Sarah the difference in cash. Sarah uses that profit to buy actual coffee from her local supplier at the new, higher market price, effectively "hedging" her costs. 🛠️ How to Buy Commodity Futures in Reality Since the price is now $1

Imagine Sarah, a coffee roaster who needs (the size of one standard coffee futures contract) in six months. She is worried prices will skyrocket due to a bad harvest. Meanwhile, Alex, a speculator, believes coffee prices will drop because of a predicted bumper crop.