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Commodity Futures Contract |
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Commodity futures contract An agreement to buy a specific amount of a commodity at a specified price on a particular date in the future, allowing a producer to guarantee the price of a product or raw material used in production. Commodity Futures Contract An agreement to buy and sell a commodity at a certain date at a certain price. For example, Investor A may make a contract with Farmer B in which A agrees to buy a certain number of bushels of B's corn at $15 per bushel. This contract must be honored whether the priceof corn goes to $1 or $100 per bushel. Commodity futures contracts can help reduce volatility in the normally volatile commodity markets, but contain the risks inherent to all speculative investing. These contracts may be sold on the secondary market, but the person holding the contract at its end must take delivery of the underlying. See also: Carrying charge, Options contract. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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NEW YORK -- The DB Commodity Index Tracking Fund (AMEX: DBC) announced in an 8-K filing with the SEC plans to adopt a change in the way it rolls commodity futures contracts with the objective of mitigating the negative effects of contango, the condition in which distant delivery prices for futures exceed spot prices. Because the market price of shares of the iShares GSCI(R) Commodity-Indexed Trust will fluctuate based on the prices of commodity futures contracts reflected in the GSCI(R) Total Return Index, the market price of the shares will be as unpredictable as the prices of commodity futures contracts. The Index is constructed of commodity futures contracts from the energy, industrial metals, precious metals, grains, livestock and soft sectors and offers diversified exposure to the commodity markets. |
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