COTTON 239 



market for like deliveries may warrant, which 

 margin must be kept good. 



Such is the cotton contract. Legal it is, and 

 almost a product in its own right. It stands for 

 cotton, but is sold and bought because of itself, 

 fluctuating more widely and frequently than the 

 real product. 



Since the principle of trading in cotton contracts 

 began in its crudeness a quarter of a century ago, 

 it has expanded to such proportions that, in the 

 words of one of the Exchange members, "during 

 the present season it is estimated that the total; 

 number of bales represented by the options bought 

 and sold in the three great markets, is in excess of 

 four hundred million, or practically forty times the 

 entire American production. This does not mean 

 that each bale of cotton has been sold forty times 

 over, but it does mean that contracts for the future 

 delivery of forty times this year's crop have been 

 traded in." 



HOW THE CONTRACT WORKS 



While cotton contracts call for the delivery of 

 cotton, it is a fact that real cotton is seldom deliv- 

 ered. The seller when selling the contract never 

 expected to deliver the commodity, and the pur- 

 chaser never expected to receive it. In fact, the 

 seller did not actually have in his possession any ! 

 cotton at all; and the purchaser, if cotton were 

 delivered to him, would not know what to do with 

 it. It would not be going too far to say that some 

 of these sellers and buyers have never seen a bale 

 of cotton ; they might even not know what one looks 

 like. 



All of these market features have had to do with 



