rable developments in the market
for the actual commodity. Consequently, prompt action is necessary when
either a higher or lower market is expected, as the Exchange market
will usually be the first to reflect changing conditions.

Suppose you feel that the price of sugar is low and probably going
higher. You try to anticipate your requirements for some time to come,
but find that refiners will not sell for more than thirty days.

You can go on the Exchange and buy futures in the quantity and month
desired. Assume then, that you pay 6.00 for your futures. Now, whatever
happens in the sugar market, you know you can get the quantity of sugar
desired at about 6.00 (see Chart 4).

The market will advance, decline or hold steady.

Say the market advances. When it seems advisable to close out your
Exchange contract and buy actual sugar, the price may have gone up to
8.00. You will then sell your futures at about 8.00, go into the market
and buy actual sugar at the same price, assuming, of course, that the
actual market has advanced in relative proportion--which is likely.
Although actual sugar has cost you 2.00 more than you had figured, you
have made 2.00 on your futures. Profit and loss cancel each other. Your
sugar cost is 6.00.

On the other hand, suppose the market declines after you have bought
futures at 6.00, and goes down to 4.00, when it seems advisable to
close out your Exchange contract. You sell your futures at 4.00, a loss
of 2.00. But you will also buy your actual sugar at 4.00, which is 2.00
lower than you had planned. Your actual sugar cost was therefore 6.00,
which is the price you had figured was favorable.

If the price still is at 6.00 when you desire to liquidate, you would
sell your futures and buy your actual sugar at about the same price.
Thus you have neither gained nor lost, but you have been sure of
getting sugar at 6.00, which is the price you felt was low.

The time to buy actual sugar is generally when the market becomes
strong and an advance in the price of the actual commodity seems
imminent; but the time to buy sugar futures is before the strength
develops. The future market invariably discounts declines and
anticipates advances.

_2. Buying of Sugar Futures to protect profits on advance sales to
customers_

While it may not be an established custom, we know numerous instances
where jobbers have sold sugars in small quantities for future delivery.
The examples to which we refer a