Author Box
Articles Categories
All Categories
Articles Resources

Trading Commodity Futures

June 05, 2012 | Comments: 0 | Views: 157

Traders who are involved in trading commodity futures work on buying as well as selling of contracts. However, the delivery of the physical goods that are involved in the transactions will have to take place in the future. Some of the common commodities that can be traded in commodity futures are metals like gold and copper. Traders may also transact with other types of raw products like soybeans or live cattle as well as pigs. Commodity futures trading provides buyers and sellers a way of managing the risks that are involved in this type of business.

The contracts in this type of market are sold or bought through authorized exchanges which either provides a trading floor or an electronic trading venue where the transactions will take place. Trading commodity futures may be somehow similar to the way trading in stocks are conducted. However, the main difference is that futures are traded on specified margins. This means that the traders only pay for a fraction of the real face value of the contracts. Traders also have more advantages when they engage in commodity futures trading rather than trading in stock, bonds, real estate and other types of assets.

Lots of traders would like trading commodity futures more than they do with other kinds of markets because they may have the opportunity to earn bigger profits within a relatively short duration of time. Traders have this advantage because of their option to use the leverage that this type of market offers. However, traders have to know what they are doing because a wrong move may cost them huge losses especially if they cannot maintain consistency in their decisions on what to buy or to sell or when they are supposed to sell or to buy.

Commodity futures trading has its own advantages over other types of liquid assets such as real estate. Traders may be able to have something to trade most of the time because they can use their profit to transact even without closing a particular position that they are holding. They would not be able to possibly do this if they are trading with bonds or stocks. Trading commodity futures may not actually be too complicated because the number of commodities that can be bought and sold through futures contracts is manageable. Traders though have the option to diversify to other segments in the market. They may also have the opportunity to earn profit even if the prices move up or move down. Whatever the market situation is, traders can earn from their diversified portfolio.

Commodity futures options involves buying and selling futures option contracts. You do not have to just trade one futures options contract. You can combine different options and trade them together in what is called trading commodity options. Spread trading is a way to limit your risk because when you lose in one contract, you profit in another.

Source: EzineArticles
Was this Helpful ?

 
0
 
0
 
Rate this Article
 vote(s)
Feedback
Print
Re-Publish

Article Tags:

Commodity Futures Options

,

Trading Commodity Options

Forex dealing is dealing in currency trading and basically includes dealing in foreign exchange while the stock market dealing is the dealing of stock in a standard market market. The two types of

By: Anil Mali l Investing > Stocks l October 25, 2012 lViews: 243

Investments in silver metal can be done by several ways. The article talks about the best ways of silver investments. Silver, the precious metal has always attracted investors for several reasons.

By: Kyles Humphrey l Investing > Gold Silver l August 17, 2012 lViews: 304

The article offers reasonable reasons for high oil prices. Crude is indispensable and it is a great source of energy. The prices on oil keep on altering, sometimes it is too high and sometimes it

By: Kyles Humphrey l Investing > Stocks l August 17, 2012 lViews: 286

Many investors are unaware of new tax that will be levied as part of the Supreme Court’s decision to uphold President Obama’s health care reform. The investment tax, as it is being referenced,

By: Ben Esget l Investing > Retirement Planning l July 17, 2012 lViews: 404

A few months ago, I was at Starbucks talking to someone about stocks and bonds, he and his wife had worked hard and were worried about the stock market. They wanted something much less risky. He

By: Lance Winslow l Investing > Stocks l July 11, 2012 lViews: 433

The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.

By: Lawrence Tepper l Investing > Retirement Planning l July 10, 2012 lViews: 240

People who would like to try the trading business have to learn the various tools that are used in analyzing the market trends and conditions. Mastering the use of the Fibonacci Trading Technique for

By: David Riveral Investing > Futures and Commoditiesl June 13, 2012 lViews: 163

The oil and gas industry is one of the considerably changing and most important global industries all over the world. Oil and gas both are obtained from under the surface of earth. These energy

By: David L Greenel Investing > Futures and Commoditiesl June 09, 2012 lViews: 228

There are many jobs available in the oil and gas industry. These jobs were available in the recession period as well. Since these jobs are considered evergreen, several people are engaging in this

By: David L Greenel Investing > Futures and Commoditiesl June 09, 2012 lViews: 185

Traders have long been using various trading techniques throughout the decades although there have been various changes that have occurred in the different markets such as commodities, stocks or

By: David Riveral Investing > Futures and Commoditiesl June 06, 2012 lViews: 158

Those who are interested in any trading activities must know something more about commodities. Learning how to trade commodities is important because it is one of the main trading systems all around

By: David Riveral Investing > Futures and Commoditiesl June 06, 2012 lViews: 153

Put your faith in Mother Nature, as opposed to human nature, and your money where your faith is. Investing in forestry and timber just makes so much common sense.

By: Ian R Harlockl Investing > Futures and Commoditiesl June 04, 2012 lViews: 150

People who would like to try the trading business have to learn the various tools that are used in analyzing the market trends and conditions. Mastering the use of the Fibonacci Trading Technique for

By: David Riveral Investing > Futures and Commoditiesl June 13, 2012 lViews: 163

Traders have long been using various trading techniques throughout the decades although there have been various changes that have occurred in the different markets such as commodities, stocks or

By: David Riveral Investing > Futures and Commoditiesl June 06, 2012 lViews: 158

Those who are interested in any trading activities must know something more about commodities. Learning how to trade commodities is important because it is one of the main trading systems all around

By: David Riveral Investing > Futures and Commoditiesl June 06, 2012 lViews: 153

Discuss this Article

comments powered by Disqus