ven buyers located at the
source of supply will find themselves facing a similar problem the
solution of which may be found in a use of the Exchange.

It is therefore evident that the selling of futures may be a transaction
the _sole_ purpose of which is to eliminate speculation from a jobber's
business.

Regardless of how careful a buyer may be, there is an element of
_speculation in each purchase of actual sugar_.

If the price goes up, there is a speculative gain--the sugar is worth
more. But if the price goes down, the buyer sustains a speculative
loss.

The measure of protection afforded by the Exchange will appeal to those
jobbers who wish to reduce the speculative element in their business.

In the example immediately following, as in all others, we have not
taken into consideration the difference between the Exchange quotations
and the Seaboard Refiners' quotations, which is explained on page 38.
This would simply inject an unnecessary complication, and would be of
no particular advantage for purposes of illustration.

Suppose you should buy through your broker from a refiner, for prompt
shipment, an amount of _actual_ sugar at 6.00, which you plan to sell
within a short time after its receipt. Instead of worrying about
subsequent sugar price fluctuations, you simultaneously hedge this
purchase by _selling_ futures in the same amount on the Exchange. The
price at which you buy actual sugar and the price at which you sell
futures should be relatively the same, since Exchange prices generally
reflect refiners' prices.

You should be able to figure the cost of your sugar at about the market
price at the time it is received or sold. (See Chart 1.)

If the price of sugar should go down to 4.00 at about the time when you
sell it, your actual sugar, for which you contracted to pay 6.00, would
be worth only 4.00; but you would then buy to cover your futures sale,
making 2.00 on this transaction, which, subtracted from the price you
paid (6.00), brings the cost down to the market price of 4.00. In other
words, you have accomplished your purpose of being able to figure your
sugar cost at the market price at the time when you received it (or at
the time you sell it). That is, although every pound of actual sugar
was sold at a loss, this loss was balanced by the profit from your
hedge.

If, on the other hand, the market should advance to 8.00 after your
original purchase and hedge at 6.00, the value of your actua