| Participant | Goal | Example | | :--- | :--- | :--- | | | Reduce risk. Protect against price changes. | An airline buys crude oil futures to lock in fuel costs. A farmer sells corn futures to guarantee a minimum price. | | Speculators | Profit from price movement. Provide liquidity. | A day trader buys S&P 500 futures betting the market will rise. A hedge fund shorts gold futures expecting a price crash. |
The concept of forward trading traces back to ancient civilizations, but the modern futures market originated in the mid-19th century in Chicago. a complete guide to the futures market
When you "roll" a contract (sell near-month, buy next-month), you pay or receive a spread. In contango, rolling costs money. In backwardation, rolling earns money. | Participant | Goal | Example | |
Unlike stocks, futures use :
In futures, both parties are obligated to perform the transaction. In options, the buyer has a right , not an obligation. A farmer sells corn futures to guarantee a minimum price