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Cotton Futures Trading Basics
Cotton futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of cotton (eg. 50000 pounds) at a predetermined price on a future delivery date.
Cotton Futures Exchanges
You can trade Cotton futures at New York Mercantile Exchange (NYMEX).
NYMEX Cotton futures prices are quoted in dollars and cents per pound and are traded in lot sizes of 50000 pounds .
| Exchange & Product Name | Symbol | Contract Size | Initial Margin |
| NYMEX Cotton Futures (Price Quotes) | TT | 50000 pounds (Full Contract Spec) | USD 3,375 (approx. 15%) (Latest Margin Info) |
Cotton Futures Trading
Consumers and producers of cotton can manage cotton price risk by purchasing and selling cotton futures. Cotton producers can employ a short hedge to lock in a selling price for the cotton they produce while businesses that require cotton can utilize a long hedge to secure a purchase price for the commodity they need.
Cotton futures are also traded by speculators who assume the price risk that hedgers try to avoid in return for a chance to profit from favorable cotton price movement. Speculators buy cotton futures when they believe that cotton prices will go up. Conversely, they will sell cotton futures when they think that cotton prices will fall.
Related Articles
- Buying Cotton Futures to Profit from a Rise in Cotton Prices
- Selling Cotton Futures to Profit from a Fall in Cotton Prices
- Hedging Against Rising Cotton Prices with Cotton Futures
- Hedging Against Falling Cotton Prices with Cotton Futures
How to Start Trading Cotton Futures
To buy or sell cotton futures, you need to open a trading account with a broker that handles futures trades. Most online brokerages out there only deal with stocks and stock options. Only a few such as optionsXpress lets you trade futures and futures options as well. optionsXpress also provide a virtual trading platform where beginners can try out futures and options trading in real market conditions without using real money.
