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All futures contracts are generally made for the purpose of speculation or hedging. As such, the general procedure for settlement may be the neutralization from the original contract by an opposite contract on settlement, so that only difference between the current and the contract price is paid or received. It's rare that actual delivery of the goods is taken, and the cost paid in settlement of futures contracts.

Futures trading is the most notable feature of business activity for the commodity exchange. In fact, the commodity exchanges are organized mainly for futures contracts. The futures contracts are made for two distinct purposes: speculation and hedging. Accordingly, they are either speculative or hedging contracts. Speculative activity is such an crucial part with the commodity exchanges that commodity exchanges are sometimes referred to as the speculative market.

All speculation represents an attempt on the part of individual to peep far into the future out with the window from the present. Speculation refers to an attempt to estimate the future trend of prices and proceed on that basis, to result in profit. Commodities might be bought at the current cost with the assumption of selling them at a higher cost in future or vice-versa.

The line between gambling and speculation is very thin. About the surface both appear to be the same, but in fact speculation refers towards the taking up of legitimate enterprise (invest in or sale of home, commodities, etc.) for the basis of an analysis of industry trends and other factors that have a bearing on rates. When, however, people start speculating recklessly and blindly without applying their mind and intelligence, and without possessing the resources necessary to meet their commitments, it degenerates into sheer gambling.

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