The futures contract is a zero-sum game (not a win-win situation) because if a trader is making money in futures contracts, another in the market will necessarily be losing the money. In other words, in futures markets, losses and gains to all positions net out to zero (the amount gained plus the amount lost equals zero).
Every long position is offset by a short position, and vice versa. The overall profits to futures trading, summing positions of all market participants must be zero. And hence, the establishment of a futures market in a commodity should not have a major impact on prices in the spot market for that commodity.
Comments