Buy Futures Contract Example -

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

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) buy futures contract example

Profits and losses are calculated and settled in your account at the end of every trading day. A futures contract is a legally binding agreement

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. While they lose money on the contract, they

Every contract specifies the exact quantity and quality of the asset (e.g., one crude oil contract covers 1,000 barrels).

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