Who Invests and Trades in Soybean Futures?
Soybean futures offer market participants a way to hedge their risk and regain control over their Soybean investments. Producers and Marketers of Soybean can minimize the risk of price fluctuations in the Soybean market by using a short hedge, which locks in a fixed selling price for the Soybean that they produce. Thus futures allow them to get the specified amount in the contract, even if prices fall in the future. Consumers of Soybean, like chocolate companies, can use a long hedge to set a fixed purchase price for a specified quantity of Soybean as per their need.
Soybean futures are also traded by speculators. Speculators have no vested interest in the underlying asset, that is, they will neither deliver Soybean nor take delivery for Soybean. They trade in and out of Soybean futures only based on speculations about the price fluctuations of Soybean over the trading period. They take on the price risk that hedgers are trying to avoid, because they hope to profit from the price movements. Soybean speculators buy Soybean futures if they believe that the price of Soybean will go up, and sell Soybean futures if they believe that the price of Soybean will go down.
Soybean Futures Contracts
Soybean futures trade electronically and through an open outcry method on the Chicago Mercantile Exchange (CME) in the U.S. Internationally, they trade on several exchanges including the Brazilian Mercantile and Futures Exchange (BM&F), Dalian Commodity Exchange (DCE) in China and the Tokyo Grain Exchange (TGE).
On the CME, Soybean trade under the symbol “S” in the open outcry method and under the symbol “ZIS” in the electronic method. The typical contract size is of 5,000 bushels, and the contract months are March, May, July, August, September and November. Price is quoted in cents per bushel.
How to Trade Soybean Futures: Costs and Different Brokers
You can trade futures by opening a trading account with a trusted broker who handles futures trading. CME Globex, CME Clear Port, AmeriTrade and Etrade are some well known online platforms for trading futures.
Most brokerages will charge the National Futures Association fees, which is roughly around $0.02 per side, along with a commission (which can range from $0.025 to $3 and more, per contract per side). You will also have to pay an exchange fee, which will vary depending on the exchange and the specific contract you are tra