Identify a futures commodity, exchange, stock, or interest rate. Use the internet to find a short history of the performance of this futures contract. Then research the possible reasons for this performance. What would you consider in investing in futures contracts?
Given this research, are you encouraged or discouraged from this type of investment?
Please provide a solid explanation of covering the 'futures contract' with 2paragraph summary a graph or a chart will be a great addition.
A short note from the classroom instructor;
"This week we look at Futures which are similar to options in that they are a derivative. They are used to help reduce risk by hedging or increase risk/return for speculators. Many associate derivatives with high risk. These is true for speculators, but are used to reduce risk for hedgers.
Years ago, two groups could get together and hedge with one another both being able to reduce risk. For example, two local farmers might make a deal so that a grain farmer and a cow farmer share risk by trading or guarantying pricing between one another.
Such relationships exist today; however, in a complex market it can be difficult and costly to find two such investors. This is where the second, and often underappreciated, investor comes in - the speculator. These are the investors looking to add risk and/or exposure to their portfolio. By doing so they create a market for those looking to hedge."