Strategies for Buying/Selling Futures
Futures contracts try to predict what the value of an index or commodity will be at a future date. The most common strategies used by speculators in the futures market are called “going long,” “going short” and “spreads.”Going long is when an investor enters a contract by agreeing to buy and receive delivery of commodities at a set price...hoping to profit from a future price increase.
Going short is when an investor enters into a futures contract by agreeing to sell and deliver the commodity at a set price...hoping to profit from declining price levels. By selling high now, the contract can be repurchased in the future at a lower price therefore generating a profit for the investor.
Spreads involve taking advantage of the price difference between two different contracts of the same commodity. Spreading is considered to be one of the most conservative forms of trading in the futures market because it is much safer than the trading of long or short futures contracts. Different types of spreads include calendar spreads, inter-market spreads and inter-exchange spreads.
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