Futures Prices
The main advantage of the futures market, which is used by so many people from farmers to the Fund Manager, is the stability and certainty.
Imagine a farmer, a middle-aged wheat. In the absence of a futures market, it has no confidence in the fact that the yield of wheat will bring income. By the time when the farmer gather his harvest, wheat prices may be so low that he could not even cover their costs. However, with the help of a futures contract, the farmer can set a fixed value of their products for many months prior to harvest. If a farmer sells a futures contract for the six months prior to harvest, that he takes the responsibility to sell пшену at a set price on a certain day delivery. In other words, now the farmer knows, what price he receives for his product.
You may think that futures provide excellent opportunities. But what if a farmer can not fulfill its obligations for reasons beyond his control, for example, drought or freezing?
To avoid the risk of obligations on the futures contract can be compensated with the purchase of a futures contract on the same amount and the opposite in their meaning. Futures Prices
Let us assume that the farmer sold a futures contract for wheat September 1 at the price of $ 120 for ton. If the farmer subsequently decides not to sell the wheat, and use it as fodder for cattle, he, in order to protect yourself is to buy 1 September futures contract at a price at that time. Thus, its obligations on the futures contract be reimbursed to the new contract.
Such operations are fairly typical for a futures market; the result of a few of futures contracts are the supply of products.
