True speculators in the futures market do not – under any circumstances – ever wish to take physical delivery of the underlying commodity. In fact, if you as an investor have an open position with your broker nearing maturity, you can expect a notice from your broker informing you that you have a position due to mature. If you have an open long position, you must either close it or be prepared to take delivery of the commodity at the full value of the contract – if you have an open short position, you must either close it or be prepared to delivery the commodity in the futures contract.


Speculators are an important part of the futures market and are responsible for much of the liquidity in the market. However, speculators don’t just buy and sell at random – at least not successful speculators! Using various methods of markets analysis speculators attempt to identify trends that suggest the direction the market is likely to take. If for instance, it seems likely that the price of rice will increase, then going long in rice futures could prove profitable as the market price of rice will be higher when the contract matures then it is presently. On the other hand, if it seems that rice will decline, then going short – selling now at a higher price – is the correct strategy.


Because speculating in futures requires a good understanding of the market conditions and other factors that could influence commodity prices, speculators tend to specialize in only one or two sectors. Some may specialize in currency futures and various financial futures, while others may concentrate on agricultural products such as cattle and hog futures.