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Beginner Question


I have just finished taking some beginning accounting classes where we talked about stocks and bonds among other things. We never talked about futures though.

Let me see if I understand correctly:

A futures contract is a promise to buy a commodity at a set time in the future and also at a set price? How does this help hedge against risk?
The answers about futures contracts you asked are on many websites. Most topics on here are about trading methods. As for a hedge aginst risk, if you own stocks in tha market, you can buy puts for each position or short the index futures to off set your stock losses in case the market starts crashing.

For example if a farmer has 1 railroad box car of corn still in the field,, corn prices shoot up really high & the farmer wants that price for his corn that could be months away from harvest, he could short 1 corn contract to lock in that price,,if corn drops the contract makes enough $ so he'z still locked in at the high price of his choosing, if corn continues to go up the contract will loose as much as his crop gains. 1 grain con is a RR box car of grain. Airlines do the same thing with jet fuel, if they think fuel is going up they buy futures contracts to b locked in at a lower price.