Futures or futures contracts are sales of commodities for delivery at some later time. In the United States, futures generally refer to CONTRACTs specifying a fixed quantity and quality of a commodity to be delivered to a location at a certain date. Futures contracts are traded under the rules of the COMMODITY FUTURES TRADING COMMISSION (CFTC). Futures contracts eliminate or reduce the RISK associated with future price changes. Initially they were used by farmers and food-industry processors to hedge against the risk of price changes. Farmers would sell a futures contract at a specified price, “locking in” that price for the PRODUCT between planting and harvesting time; this is referred to as HEDGING. Food processors would buy futures contracts locked in the cost of raw materials. Over time a wide variety of futures contracts have been developed, including those concerned with FINANCIAL INSTRUMENTS, STOCK MARKET indices, INTEREST RATES, energy products, foreign currency, and precious metals. In a futures market like the CHICAGO BOARD OF TRADE, someone who buys a futures contract is said to have “gone long.” If, after going long, the price of the underlying commodity or ASSET rises, the price of the futures contract will rise, and the buyer profits. In the example of the food-processing company, the PROFIT from buying a futures contract would offset the increase in price of the commodity in the cash market. If, instead, the price of the commodity declined, the value of the futures contract would decline, causing a loss for the food processor, but the cash-market price would also have decreased, offsetting the loss associated with purchasing the futures contract. Someone who sells a futures contract is said to have “gone short.” If the price of the underlying commodity or security rises, the short seller loses, but if the price declines, the short seller can buy back the futures contract at a lower price and profit by the difference. In most situations, buyers and sellers of futures contracts “close out” their trades before the expiration date of the contract. They could also take or make delivery of the commodity or security, as per the stipulations in the contract. In addition to hedging, futures contracts are widely used as speculative investments. Holders of futures are required to pay an initial margin, usually equal to 10 percent of the value of contract. Thus, futures contracts provide significant LEVERAGE. For example, if a contract is worth $100,000, a buyer is only required to put up $10,000. Should the value of the underlying ASSET increase by 5 percent, the investor earns $5,000 (5 percent of $100,000), a 50-percent return on their INVESTMENT. The buyer could also lose money in the same leveraged manner if the value of the contract decreased by 5 percent. If the value decreased, the investor would receive a margin call, requiring him to put up additional funds or have the contract closed. The most famous recent example of the potential for profit from futures market speculation was the report that Hilary Clinton earned approximately $100,000 from an initial investment of only a few thousand dollars. Futures markets are known for their widely varying prices. Changes in weather, political turmoil, and rumors cause rapid changes in futures markets, resulting in huge profits and losses. Futures markets are also known for their “pits,” intense bidding rooms where brokers shout and use hand signals to exercise trades for their customers. Prior experience as a football player is considered a valuable training for work in futures market pits.