Who Trades Futures: Know the Trade Key Players

For an individual without an economic or financial background, it is understandable to ask what futures trading is. Basically, futures trades are premeditated trading wherein the completion of the transaction would be on the agreed date by the buyer and seller. The prices are also predetermined and the goods would be delivered at a particular date in the future. Futures trades are sealed with a contract and is legally binding with legal sanctions attached should failure of delivery happens.




The contracts of the futures trading clearly stipulate the terms and conditions of the trade and are regulated by government agencies and guaranteed by a clearing house. Futures trading contracts are commonly initiated by the buyer to ensure that the product of certain goods and commodities would go directly to the contracting party. In simple terms, futures trading contracts are black-and-white reservations to ensure that the buyer will get his needed products at a particular time in the future. Having a contract where the exact price of the products are indicated would ensure the buyer and seller that the price would not be affected by varying factors such as natural calamities, exchange rates, and product decay.



The Process

Futures trading contracts are formal contracts entered into by businessmen, producers, and entrepreneurs. To consider a futures contract successful, both parties must go through this process:



A hedger or an investor takes a look at the market for possible good investment on things he prefers to invest on.

If he has already decided which area should he invest or what he needs for his business venture, a contract would be made between two parties with provisions clearly stipulated therein.

The exchange of commodities and payment is done on the indicated date in the contract. Other specifics such as price, quantity, the mode of payment, and delivery are also stated in the futures contracts.

After the indicated period like three months or a year, the delivery or exchange of goods will take place.

And the futures contract can be closed and deemed completed.

Who Trades Futures?

Usually, the ones who get into futures trading are major investors, entrepreneurs, small-scale and big-time businessmen as buyers, while the usual producers or sellers are farmers, livestock growers, miners, and local crop growers. Futures trading is a financial and economic relationship by sellers and buyers who are interested to attain financial profit with money, bonds, and treasury notes as underlying products.