Buy Futures Contract Example May 2026

If corn drops to $4.00, they are still obligated to pay the contract price of $5.00. While they lose money on the contract, they benefit from lower costs in the physical market, "locking in" their budget. Buying Example: The Individual Trader (Speculation)

Buying a futures contract does not require paying the full value of the asset upfront. Instead, you post a , which is a small fraction (typically 3–12%) of the contract's total "notional" value. buy futures contract example

Because you control a large asset with a small deposit, small price changes can lead to significant gains or losses that may exceed your initial investment. Buying Example: The Cereal Manufacturer (Hedging) If corn drops to $4

A speculator with no interest in owning actual oil believes prices will rise due to geopolitical tension. What Are Futures? How Futures Contracts Work Instead, you post a , which is a

By harvest, corn hits $6.00 in the open market. The manufacturer's contract allows them to buy at $5.00, effectively saving $5,000.

The manufacturer buys one corn futures contract (covering 5,000 bushels) at the current futures price of $5.00 per bushel .

A futures contract is a legally binding agreement to buy or sell a specific asset—such as a commodity, currency, or financial index—at a predetermined price on a set future date. When you "buy" a futures contract, you enter a , committing to purchase the underlying asset at the expiration date, regardless of the then-current market price. The Mechanics of Buying Futures