Corn, wheat, cattle, coffee and orange juice—all basic products or commodities that eventually find their way onto our tables are traded on the futures market, where there is much money to be made (or lost) if you guess right on futures trading prices. There are also futures markets for metals, cotton, energy, foreign currencies, stock market indices and interest rates. Futures contracts are traded on exchanges like the Chicago Mercantile Exchange and the New York Commodity Exchange.

A futures contract on commodities is an agreement to either deliver or receive delivery of a certain quantity of a commodity on a particular date in the future at an agreed price. Futures contracts are used as hedges to transfer the risk of price changes. A farmer who sells wheat may want to lock in a future price now, to hedge against the possibility of a drop in prices in the future. A bread manufacturer may buy futures if they think the price of wheat will go up before it is harvested.

Speculators provide the liquidity for the futures market. That's where you come in. You are trying to make money based on price fluctuations in the future. As a speculator, you would close out the futures contract before the delivery date and would not actually deliver or receive corn or cattle.

How can you invest in futures?
You can buy and sell futures contracts through most full-service and some discount brokers. Choose a broker based on the services you want and the commissions and fees you are willing to pay.

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