The manner in which the legitimate trader in futures protects himself from price fluctuation is easily understood. While a deal in cash wheat would refer to a definite shipment as shown by warehouse receipts, a deal for future delivery is merely an obligation involving a given quantity of grain at a given time at a given price. Being merely a contract and not an actual shipment, the seller does not require to produce the grain immediately nor is the buyer required to hand over the purchase price when the trade is made. Thus it is possible to buy a thousand bushels to-day for October payment and sell a thousand bushels to-morrow for October delivery, cancelling the obligation. The trade can be balanced at any time before October 1st. Again, a thousand bushels of October wheat may be bought (or sold) to-day and the future switched to May 1st by the sale (or purchase) of a thousand bushels for May delivery. Take the man with the blazing red tie half way up his collar, the man who this morning offered to sell fifty thousand bushels for October delivery at $1.43 7/8. Suppose that he represents a company with a line of elevators at country points. To his office at Winnipeg has come word from country representatives that fifty thousand bushels have been purchased for the company. At once he enters the Pit and sells fifty thousand bushels for delivery at a future date, thereby "hedging" the cash purchase out in the country. Once this future of fifty thousand is sold the company no longer is interested in market prices so far as this grain is concerned. If the market goes up, their cash grain is that much more valuable, offsetting the loss of an equal amount on the future delivery; if the price goes down, what is lost on the cash wheat will be gained on the future. So that the difference between the price paid for the grain at the country elevators and the price at which they sold "the hedge" is the only thing which need concern the grain company and it is here they must look for expenses and profits. This method of hedging enables a grain company to make purchases in the country on much smaller margins than was possible in the early days when the marketing machinery was less completely organized. It eliminates to the greatest extent the necessity of speculating to cover risks.