Coffee Futures – Buying and Selling Stock at Your Fingertips
In foreign exchange, a future contract is a legally binding agreement to purchase or sell a certain asset at a certain date in the future, between unknown parties, usually not related to each other. The actual asset transacted here is typically a currency or other financial instrument. Futures contracts are generally used by businesses and individuals to exchange one type of financial instrument for another, such as futures for currencies. This is known as commodity trading, and this form of trading is extremely popular on the stock market.
The coffee futures market in South America is quite different from the United States and Canada. In South America, coffee futures are normally arranged in per contract. This means that one coffee futures buyer will be responsible for paying a specific amount per contract, while another buyer in North America, Europe, Japan, or Hong Kong can pay a much larger amount per contract, because per contract in South America means a very large initial payment.
There are different kinds of future contracts depending on what it is that you’re buying or selling. Commodity futures contracts, such as coffee futures, are financial instruments used to speculate on the market value of certain goods. For example, if I were interested in buying soybeans, I would want to find a broker that offers me – at minimum – 100 shares of soybeans per contract. If I wanted to sell the same stock, but to buy 100 shares at that stock price, then I would want to find a different brokerage that offers me – again, at a minimum – 100 shares of soybeans per contract. Futures contracts are extremely useful tools for speculators all around the world, and it is no wonder that they are so popular in South America. When you buy and sell stocks, commodities, currencies, and any other financial instrument, your ultimate goal is to maximize your profit, so that you can make money by using your investment capital wisely.