Futures are simply a way for the "market to have some stability"

For Example: Lets suppose you own a silver mine and today's price per ounce is $20. You can sell a "futures contract" that would give the investor a guaranteed price of $20 per ounce. Usually a Futures Contract is for a very short period of time 30-120 days.

Going Short: If you believe that silver is going to decline in price than you would buy a contract that guarantees a buyer will pay $20 per ounce. If it declines to $1 per ounce than your contract gives you a $1 per ounce profit.

Going Long: If you believe prices are going to increase, then you would go long. This means that if you buy a $20 per ounce contract, and gold goes up to $1 per ounce during the contract period, you would pocket the difference ($1.00 per ounce).


Futures have quite a bit of risk if the market goes against your contract. Your broker can do a margin call at any time; sell your contract; and then take the losses from your trading account.

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