To understand how futures contracts work, consider gold mining or agriculture. The original Chicago Board of Trade was in fact a futures market set up for farmers. But gold miners, too, could benefit from futures contracts, and no one knows gold like Alaskans.
Say you are a gold miner and you want to borrow money to initiate your summer mining seasoning in a remote location where you won’t be able to get out again until the next fall to sell your nuggets. The idea is that you borrow money from a bank in the late spring to pay for starting up your mine; then you pay back your loan in the fall after most of your gold is finally processed and able to be sold.
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