How to Buy Wheat Futures

Buy wheat futures through a commodities broker.

Wheat futures are contracts for the future delivery if a specified amount of wheat. Futures trade on the futures commodities exchanges. The standard wheat future contract is for 5,000 bushels of wheat and the mini-sized wheat contract is for 1,000 bushels. Buying wheat futures contracts allows a trader to profit from any increase in the price of wheat.

Instructions

1. Open and fund a trading account with a commodities broker registered with the Commodities Futures Trading Commission--CFTC. Commodity and futures brokers are required to be CFTC registered and are often specialized brokers who do not offer stock or other security trading.

2. Download and install the trading software recommended by the broker. Commodities brokers usually offer several different software packages with different fee structures. The broker's representative will help you select the best package for trading wheat futures and how to get it set up.

3. Practice buying and selling wheat futures contracts using a simulated trading account. Futures brokers provide simulated money accounts for traders. Practice using the trading software and verify the profitability of your trading strategy.

4. Buy wheat futures contracts using your software and live trading account. Switch to your live, real money trading account when you are ready to purchase wheat futures. Futures contracts require a margin deposit for each contract. The margin deposit for standard wheat futures is $1,350 per contract. Mini-sized wheat contracts have a margin deposit of $270.

Tips & Warnings

• Futures brokers typically require a deposit of $5,000 to $10,000 when opening an account.

• Wheat futures price changes are measured in ticks. For the mini-sized contract, each tick is one-eighth of a cent, worth $1.25 per contract. Standard wheat contracts have a tick of one-quarter of a penny, worth $12.50 per contract.

• To avoid taking delivery of 1,000, 5,000 or more bushels of wheat, close out your wheat futures positions with offsetting sell trades or roll the contract to a future expiration date.

• Wheat futures' trading is highly leveraged and you can lose more than your margin deposit if the price goes in the wrong direction.

• Wheat futures have price limit moves that stop trading if the price moves too far in a single trading day. A limit move on the standard wheat contract is a gain or loss of $3,000. If you are on the losing side, you may not be able to close your position to avoid further losses.

References

• Investopedia: Futures Fundamentals, How to Trade
• CME: Wheat Futures Contract Specifications