I perfectly understand short selling when a person borrows items, sells them at high price, waits for price to fall and buys back the goods so he can return them from where he borrowed and hence profiting.
The situation is slightly confusing me in the futures market where I read that there is no borrowing and one must have physical goods. For example, copied from a financial blog:
You enter into a futures contract to sell 100 shares of IBM at $50 a share on April 1 for a total price of $5,000. But then the value of IBM stock drops to $48 a share on March 1. The strategy with going short is to buy the contract back before having to deliver the stock. If you buy the contract back on March 1, then you pay $4,800 for a contract that’s worth $5,000. By predicting that the stock price would go down, you’ve made $200.
I am confused about where the $200 profit actually comes from because there is no borrowing on futures and if a person buys it back he stays with it, how does he profit?