The essence of a futures market is in its name: Trading involves a commodity or financial instrument for a future delivery date, as opposed to the present time. (View Highlight)
Alternatively, he could sell futures. Some of the major advantages of the latter approach are the following: 1. The futures contract is standardized; hence, the farmer does not have to find a specific buyer.
2. The transaction can be executed virtually instantaneously online.
3. The cost of the trade (commissions) is minimal compared with the cost of an individualized forward contract.
4. The farmer can offset his sale at any time between the original transaction date and the final trading day of the contract. The reasons this may be desirable are discussed later in this chapter. 5. The futures contract is guaranteed by the exchange. (View Highlight)