Jewelry, art, stamps, and collectibles are still other examples of investing where they are kept for a long time in hope their value appreciates. Trading

Trading is also investing but time frame for a return on that investment is a much shorter period, usually a matter of a few days or weeks.

The most obvious example would be day trading where a trader is in and out of a market same day.

Still other trading takes place over a period from a few days to a few weeks.

Most trading takes place with individual stocks and commodities, with commodity markets being most predominant vehicle.

The person on other side of transaction has agreed to sell you that commodity or financial instrument at that specified price by specified date. If you sell a futures contract prior to that date you have offset your position and have either a profit or loss on trade.

The stock you bought 3 years ago is same stock you can buy today. Futures contracts, on other hand, have very limited lives. They are traded in a regular series of contract months referred to as delivery months.

Futures contracts have expiration dates after which no further trading for that month can take place. The September corn contract you traded last year is not September corn contract you are trading this year. In fact last September’s corn contract no longer exists.

Many futures contract months of same commodity trade simultaneously on market, sometimes even years into future. The current contract is called front month and other contracts are called back months. They are called back months even though they are for future months.

For example, corn trades for months of January, March, May, July, September, November and December. Suppose today’s date is August 4, 2000. The current contract month for corn would be September 2000 and so is called front month. The months of November and December 2000, January 2001, March 2001, May 2001 and July 2001 are back months even though they are in future and even flow into next year. (This may sound confusing but its not ...really)

All of these months can be traded at same time although most of trading activity takes place in front month.

When current month expires next contract month becomes front month and so on.