How to Trade Corn Futures?

Answer 1

If you’ve ever driven through corn-country, you know that corn is a huge crop that is central to diets and economies alike. And, if you follow the financial markets at all, you also know that the prices of corn futures have sky-rocketed in the last couple of years. Whether this is due to weather concerns, crop variation, or industrial use (for making products like ethanol), it’s clear that there is a lot of money to be made in that golden crop. Like any crop futures, investing in corn futures is fairly high-risk. But with payoffs this large, it’s hard to resist. Here are a few things to keep in mind.

- Step One: What’s your approach?

When buying futures of any kind, you have a few options when it comes to getting your feet wet. One way is to open a managed account with a broker, just like you would with regular equity investing. This has the advantage of using your broker’s professional knowledge. You might also join a commodity pool, which is similar to a mutual fund for commodity futures. Your third option is to go it alone, so to speak, and manage your own account. This can be more difficult, but you won’t have anybody else’s overhead to pay out of your profits.

- Step Two: Think Corn

The basic idea of trading in futures is that you have a contract to buy a quantity of product from someone at a future date, for a fixed and settled price. This makes it a popular financial tool for not only producers and buyers, but for speculators as well. Pay attention to corn prices, and if the price drops at all, you can buy big in the future if you believe the crop will continue its overall increase.

And that’s it! While futures trading may be riskier than other kinds of trading, the payoffs are huge, and a fortune is waiting to be made!