I n a short hedging program, futures are sold. This strategy is used by traders who either own the underlying commodity or are in some way subject to losses if its price declines. He worries that wheat prices will rise in the meantime because he has already guaranteed a price at which to sell flour to a baker in October. In September the cash price of wheat rises, the value of his futures contracts will rise too. He is in the market to make profits by buying low and selling high.
Speculators are very important to a market.
They make it more liquid and often take the opposite side of hedgers' trades. In this way. they act as a type of insurance underwriter by bearing the risk which hedgers seek to avoid. Spreads involve the simultaneous buying and selling of futures contracts with different characteristics.