How to Invest in Commodities

A futures contract is a legally binding commitment made to a futures exchange; the contract describes the quantity and quality of the commodity to be delivered at a specific month in the future and at a price agreed upon at the time the commitment is made. Each future contract specifies a date at which this transaction must occur this is known as the settlement date the specifics of how the transaction will be fulfilled the called the delivery. Less than 3% of futures contracts traded each year result in delivery. Usually most speculators offset their contracts before the contract expires.