What is cotton futures?

Cotton futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of cotton (eg. 5000 bushels) at a predetermined price on a future delivery date. 3. How is cotton traded?

What are futures?

What are 'Futures'. Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on...

What is cotton spread trading?

Spread trading: This strategy involves buying one cotton futures contract and selling another. For example, a trader might buy a March cotton futures contract and sell a May contract. This strategy is based on the belief that the price difference between the two contracts will change in a profitable way.

How do futures contracts work?

1 Investors can use futures contracts to speculate on the direction in the price of an underlying asset. 2 Companies can hedge the price of their raw materials or products they sell to protect against adverse price movements. 3 Futures contracts may only require a deposit of a fraction of the contract amount with a broker. More ...