Example: How Wheat of the World uses a wheat futures market
It's summer, and Wheat of the World expects wheat prices to increase by winter due to smaller harvests caused by drought. Instead of waiting for winter, when prices might be higher, it buys wheat futures contracts. These contracts let the company lock in the current lower price of $5 per bushel of wheat by agreeing to buy 100,000 bushels in December.
Current price: $5 per bushel
Futures contract size: 100,000 bushels
Total investment: $500,000
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