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<p>[QUOTE=&quot;GDJMSP, post: 650201, member: 112&quot;]All futures are based on predicting the future. Longs are betting that price will rice - shorts are betting that the price will drop. There is no correlation to actual physical items.</p><p><br /></p><p>It&#039;s like I said before - futures are decaying assets. They are based on time and since time ever marches forward then the value of any given future contract gradually declines as time advances. This is regardless of what the actual price of the given commodity is at any point in time. </p><p><br /></p><p>Say you want to buy longs on wheat for next year. If the value of the wheat never changes even 1 cent during that year - then as time progresses your future contract loses value until eventually at the expiration of your contract your contract becomes completely worthless.</p><p><br /></p><p>Now on the same contract, if the price of wheat drops during that year, then your contract loses value even faster. Eventually becoming completely worthless even before expiration.</p><p><br /></p><p>Now what happens if the price of wheat increase during your 1 year contract ? Well, it depends on how much it increases as well as when it increases. If it increases a lot, tomorrow, then your contract becomes more valueable and you can sell it to someone else for a profit. But if the price does&nbsp; not increase (the same amount as above) until 6 months into the term of your contract then the increase in the value of your contract is much less because of the time element. So again your asset has decayed. And the closer you get to expiration date the faster it decays. Eventually, say the day before expiration, the price of wheat is up from when you bought the contract, but not a whole lot. Again your contract is worthless. The only possible advantage you have left is to call the contract and take delivery of the actual wheat. But of course you will have lost anyway even by taking delivery. Because the premium you paid for the future contract was well in excess of the increase in price. And of course you now have to do something with the wheat you own. So you have to sell it. That also incurs costs, and so you have lost even more.</p><p><br /></p><p>The only possible way you can make any money on futures contracts is if the price of the commodity goes up greatly, and very soon after you buy the contract. Then you can sell that contract to somebody else for a profit. If it doesn&#039;t - you are going to lose money, it is inevitable.</p><p><br /></p><p>You see, with futures you are paying for time. Not the commodity. And as time goes on - it becomes cheaper and cheaper because there is less chance that the commodity will increase in the time left.</p><p><br /></p><p>As I said, it is gambling in its purest sense. Many think Las Vegas, Monte Carlo - where ever is the gambling capital of the world. It isn&#039;t - Wall Street puts all of them combined to shame.[/QUOTE]</p><p><br /></p>

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