Today Lumber Futures are basically used by large hedge funds or out right speculators to lock in or hedge inventory and require more steps to actually turn the futures contract into real lumber. The hedge funds and Lumber industry speculators can use the futures market to buy or sell a position almost instantaneously which does provide liquidity with caveats. Most traders main objective isn’t actually taking delivery of the lumber but using the contract as leveraging tool to make profit or hedge physical lumber already bought. . Today there are fewer producers that actually use futures which currently has roughly over 2000 open interest contracts which can cause bouts illiquidity and PTSD. The use of futures still requires more steps to actually complete the transaction hence why I compare trading futures to playing the “air guitar”. The entire CME Lumber contract Has a market cap of roughly $350 million based on current open interest at Friday’s contract close. If you like roller coasters then lumber futures are for you but be warned it’s the equivalent to riding “Space Mountain” all day long for 2 weeks straight. Today Lumber Futures are used mostly as a trend indicator for the lumber market . Sadly I speak from experience and occasionally have bouts of “PTSD” from when I thought I was a futures expert. Furthermore, I’m gonna go out on a “limb”, which will break and if I were literally on the “limb”I would suffer injuries, so be forewarned that using lumber futures is a great tool but you can be right and still lose all your money ! Have an Awesome Day.
@Michael_Haas I like how you call trading futures like playing “air guitar”. I often use the analogy of “playing fantasy football vs playing in the NFL”… “yes… they are related but…”
you can be right and still lose all your money !
Do you have any good stories here? 