Quote Originally Posted by philly and the phanatics View Post
i have no idea but isnt it where you are buying the stock at a future price now. So instead of buying a stock that you think will rise, you buy one that you think will fall?!? idk i have no idea about stocks just guessing
A Future is a contract in which someone agrees to buy a commodity at a specific price now, but will get this commodity from the seller at a future date. So if your an Onion farmer who is shipping out your crop on june 11th, you can get a set price for it now so you can feel comfortable knowing how much money you'll make during harvest.

Speculators trade around these contracts in order to try and make a profit. Because of the nature of how a market rises or falls (there needs to be a buyer and a seller), even if all speculators were in kahoots with each other they couldn't push the price of onions up because there would have to be someone who wanted to sell. If you have 10,000 speculators who want to buy onions and 0 people who wanted to sell, the price of onions would stay exactly the same. The reason speculators keep prices relatively stable is because they are constantly guessing at the correct value of onions, and trading contracts in order to take advantage of times where the value is slightly incorrect.

Farmers are much worse speculators than professionals and have less of an idea of what the true value of an onion is at a specific time.