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Futures QuotesThe futures contract began in the early to mid 1800's. Farmers (sellers) and dealers (buyers) came up with the idea that would give both parties "guarantees." Both the farmers and the dealers would agree to a future sale of grain by a certain date for cash. Here is a scenario of how it might have worked. The farmer would agree with the dealer on a certain price for say 6,000 bushels of wheat (commodity) to be delivered to the dealer by the end of June. The agreement was acceptable by both parties. The farmer was happy because he already knew how much he was going to make for his crop. The dealer, on the other hand, knew what his costs were upfront so he would know what it would have to be sold for to make a profit. There may have been a written agreement with the terms of the "contract" and a small exchange of money to seal the "guarantee". Agreements like this soon became very common and as they became standard were even used as collateral with the local banker. Here is where things began to get interesting. These contracts would begin to change hands between different farmers and dealers prior to the delivery date. The farmer might decide he doesn't want to deliver his wheat so he might pass his obligation on to a neighbor. Or, the dealer may not want the wheat and he finds someone who does and sells the contract to them. The interesting thing is that the price of these exchanges would fluctuate up and down depending on what was happening with the current wheat market. If it was a bad weather year, those people who contracted to sell wheat were feeling good about life because the bad weather meant there will be a shortage of wheat at harvest and the price would be higher. However, if it was a good harvest year, the price the farmers could get for their wheat would be less because of the over supply. Here is where the futures market really got crazy. Before long there were people who had no intention whatsoever of buying or selling wheat who began trading these contracts. They were called speculators. They hoped they would be able to buy low and sell high or sell high and buy low. Thus, began the craziness of trying to make a living in the futures market.Futures Magazine is written for traders who use futures, options, stocks, forex and derivatives markets to make money. Bloomberg.com has realtime stats about the futures market.
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