A “future” in market terms, is a contract to buy or sell a commodity for a specific price at a specific time in the future. That contract (or future), can be bought and sold up until that date. Think of it this way: today, an apple costs 25¢ but you think the price will go up 50¢ next fall. You decide to buy a contract with an apple farm for an apple next fall at today’s price. Now you can sell that contract up until next fall.
Posts Tagged ‘commodity’
To Commoditize is…
Thursday, July 21st, 2011To commoditize is to treat something like a commodity. When you commoditize, you take a set of similar products and treat them as indistinguishable. Imagine printer paper: you don’t care which brand you get; all that matters is getting the best price. Printer paper is a commoditized market. However, the laser printer market is not a commoditized market because the different brands and their respective features matter more to you.
Commoditization takes differentiated products and transforms them into a uniform commodity market.