Quote:
Originally Posted by Andrewunknown
Rhodytrader is right on - the only thing to add is that you buy or sell contracts. These contracts put the holder under obligation to buy or sell a specific quantity of a commodity when the contract settles. Most who trade futures (for any class of instrument, not just commodities) cover their positions shortly after opening them, often during the same session, other than those involved in farming who have reason to use futures contracts, holding them for delivery to lock in specific price for sale or purchase of corn, or soybeans or whatever. So, if you go long on a contract, you'd flatten your position by selling; and if you were to short (sell), vice-versa.
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My dad told me that a friend of his got into futures, but he didn't sell in time...... he ended up actually getting a train-load full of corn or wheat (whatever he ordered) delivered to the local train station and he had to take possession within 48 hours of it arriving or something.... he had to sell it at a huge loss.
So DEFINATELY double-check and make sure you sell well before the scheduled delivery!!
I don't know if this has been changed since then, I think this took place in the 80's or 90's, but definately something to consider.
Personally I use ETFs (indexes) to trade things like Gold, Energy (Oil), etc. In this case I don't think you're owning the commodity though, it's a group of companies that produce it.