Naturally the greater the amount of sugar any one concern may have in transit the greater the need for protection. We call this kind of transaction particularly to the attention of buyers having branch houses who find themselves obliged to make relatively large purchases to supply their trade in the face of a market in which they have no confidence. These disadvantages at which out-of-town buyers are sometimes placed might be overcome by using the Exchange. On the other hand, when refiners are badly behind on deliveries, even buyers located at the source of supply will find themselves facing a similar problem the solution of which may be found in a use of the Exchange. It is therefore evident that the selling of futures may be a transaction the _sole_ purpose of which is to eliminate speculation from a jobber's business. Regardless of how careful a buyer may be, there is an element of _speculation in each purchase of actual sugar_. If the price goes up, there is a speculative gain--the sugar is worth more. But if the price goes down, the buyer sustains a speculative loss. The measure of protection afforded by the Exchange will appeal to those jobbers who wish to reduce the speculative element in their business. In the example immediately following, as in all others, we have not taken into consideration the difference between the Exchange quotations and the Seaboard Refiners' quotations, which is explained on page 38. This would simply inject an unnecessary complication, and would be of no particular advantage for purposes of illustration. Suppose you should buy through your broker from a refiner, for prompt shipment, an amount of _actual_ sugar at 6.00, which you plan to sell within a short time after its receipt. Instead of worrying about subsequent sugar price fluctuations, you simultaneously hedge this purchase by _selling_ futures in the same amount on the Exchange. The price at which you buy actual sugar and the price at which you sell futures should be relatively the same, since Exchange prices generally reflect refiners' prices. You should be able to figure the cost of your sugar at about the market price at the time it is received or sold. (See Chart 1.) If the price of sugar should go down to 4.00 at about the time when you sell it, your actual sugar, for which you contracted to pay 6.00, would be worth only 4.00; but you would then buy to cover your futures sale, making 2.00 on this transaction, which, subtracted from the price you paid (6.00), brings the cost down to the market price of 4.00. In other words, you have accomplished your purpose of being able to figure your sugar cost at the market price at the time when you received it (or at the time you sell it). That is, although every pound of actual sugar was sold at a loss, this loss was balanced by the profit from your hedge.