The principle of «Buy cheaper – sell more expensive» works here, the difference is that at the finish of your deal does not need to immediately pay the cost of goods. The buyer and the seller agree on the price and make a pledge, and the final settlement date is specified in the contract.
There are 2 ways to make a profit on commodity futures trading
– a game for rising. The trader buys the product at a certain price, resells it more expensive, then returns the agreed amount, and the profit is on the difference. Such traders are called Bulls, and the strategy is Bull.
– a game for falling a price. The buyer borrows the goods, immediately sells them, and when the price falls, he buys the same goods cheaper, returns them to the seller and makes a difference. These traders are traditionally called Bears, and Bear strategy.