What are wheat futures?
Wheat futures (W) are exchange-traded commodities contracts on the Chicago Board of Trade (CBOT) and one of the most widely planted crops in the U.S. The primary use for wheat is flour, and wheat byproducts are also used in livestock feeds. Wheat has significant industrial applications, too, as an ingredient in starches, adhesives, and coatings. While there are several wheat futures classifications, Chicago Soft Red Winter (SRW) wheat and KC Hard Red Winter (HRW) wheat set the global industry standards for wheat price risk management, with Chicago SRW wheat being the most liquid wheat futures contract in the world.
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How to trade wheat futures
Wheat futures contracts are offered through CBOT on the Globex® trading platform and are available to trade electronically through Schwab. An account approved to trade futures is required in order to trade wheat futures.
Wheat futures contract specifications
Considering trading wheat futures? Here are the wheat futures contract specifications.
|Exchange, Product Name, Product Code||Chicago Board of Trade, Wheat, W|
|Contract Size||5,000 bushels|
|Minimum Tick Size and Value||0.25, worth $12.50 per contract.|
|Trading Times||Wheat futures trade electronically on the Globex® platform from 8:00 p.m. U.S. ET to 2:20 p.m. U.S. ET on the following day. Please note that there is a maintenance period from 8:45 a.m. U.S. ET until 9:30 a.m. U.S. ET during which trading is halted.|
|Principal Trading Months||Principal trading months for wheat futures include March, May, July, September, and December.|
At Schwab, you also get access to advanced trading platforms and education, where you can take advantage of market research, real-time wheat futures quotes, and other specialized tools.
Why trade wheat futures?
Traders can use grains futures contracts like wheat to hedge or diversify their portfolio using investments that have a low correlation with their financial assets. Since wheat futures contracts (W) are priced in U.S. dollars, the performance of the U.S. economy plays a crucial role in their pricing, providing a way for investors to use wheat futures as a potential hedge against inflation concerns.
Traders can also use wheat futures to speculate on the price of wheat, which can change based on a number of different factors, most notably fluctuations in crop output due to weather events. Wheat futures are influenced by demand due to consumer trends, demand for protein from livestock and thus, wheat for feed, changes in government subsidy or tax policies, and the value of the U.S. dollar.
It is important to understand the benefits and risks involved with wheat futures before placing a futures trade. Compared to traditional investments, with wheat futures you can trade outside of the traditional market hours associated with equities and take advantage of trading opportunities regardless of market direction. Wheat futures also provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like wheat futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
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