THE GRIP OF THE PIT , 197 



and demand dictates instead of the whole crop being 

 dumped at once and smothering prices below the cost 

 of production. Or perhaps it is in store at the terminal 

 where Mr. Exporter can handle it. It will be seen that 

 the mutual arrangement to buy and sell for future 

 delivery simplifies matters for everybody in the grain 

 trade. 



The manner in which the legitimate trader in futures 

 protects himself from price fluctuation is easily under- 

 stood. While a deal in cash wheat would refer to a 

 definite shipment as shown by warehouse receipts, a 

 deal for future delivery is merely an obligation involv- 

 ing a given quantity of grain at a given time at a given 

 price. Being merely a contract and not an actual 

 shipment, the seller does not require to produce the 

 grain immediately nor is the buyer required to hand 

 over the purchase price when the trade is made. Thus 

 it is possible to buy a thousand bushels to-day for 

 October payment and sell a thousand bushels to-morrow 

 for October delivery, cancelling the obligation. The 

 trade can be balanced at any time before October 1st. 

 Again, a thousand bushels of October wheat may be 

 bought (or sold) to-day and the future switched to 

 May 1st by the sale (or purchase) of a thousand 

 bushels for May delivery. 



Take the man with the blazing red tie half way up 

 his collar, the man who this morning offered to sell 

 fifty thousand bushels for October delivery at $1.43%. 

 Suppose that he represents a company with a line of 

 elevators at country points. To his office at Winnipeg 

 has come word from country representatives that fifty 

 thousand bushels have been purchased for the company. 

 At once he enters the Pit and sells fifty thousand 

 bushels for delivery at a future date, thereby "hedging" 



