Cotton Futures

Cotton Futures
COTTON FUTURES
When a spinner books a large order for yarn, with delivery extending to, say, three or four months, he will base the cost on the days' price of cotton, and to cover himself against loss he ought to buy enough cotton to complete the order. If for some reason he cannot buy all " spot " he will buy " futures " as a cover pure and simple. Suppose 600 bales are required, then he may buy 200 July, 200 August, and 200 September. Thus he does not buy any actual cotton; the deal is only on paper, but the spinner has covered his requirements to complete his order, and at the price quoted when he buys. When he wants the cotton he sells his " futures " and buys " spot " or actual cotton.

Dictionary of the English textile terms. 2014.

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