Legal Definitions - CBOT

Term: CBOT

Definition: CBOT is an abbreviation for Chicago Board of Trade. It is a commodity exchange where traders buy and sell futures contracts for agricultural products, such as corn, wheat, and soybeans, as well as financial products, such as treasury bonds and stock indexes.

Example: A farmer who grows corn can sell a futures contract on the CBOT to lock in a price for their crop before it is harvested. This helps them manage their risk and ensure they will receive a certain amount of money for their corn, even if the market price drops.

Explanation: The example illustrates how a farmer can use the CBOT to manage their risk by selling a futures contract. By doing so, they are essentially agreeing to sell their corn at a certain price in the future, which protects them from price fluctuations. Other traders, such as speculators and investors, can also use the CBOT to make bets on the direction of commodity and financial markets.