Futures and Commodities Trading (2024)

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Futures and Commodities Trading

Futures and commodities can be very complex and volatile asset classes that differ significantly from investing in stocks and bonds. This means that investors need to do significantly more research before wading into these types of investments.

Guide to Futures and Commodities Trading

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Frequently Asked Questions

Is commodity trading the same as futures trading?

No, though they are related. Futures are a type of financial derivative in which you agree to buy or sell a certain asset at a certain price at a particular time in the future. Commodities are a type of asset representing fungible goods, such as oil, iron ore, or wheat. Commodities are usually traded using futures.
Learn MoreCommodity Spot Prices vs. Futures Prices: What's the Difference?
Which commodity is the best to trade?

There is no best commodity to trade in the same way there is no best stock to trade. The commodities market is volatile and significantly affected by economic cycles. This means that no one commodity will be the easiest to trade or the most profitable.
Learn MoreAnalyzing the 5 Most Liquid Commodity Futures
See Also
Advantages of Trading Futures vs. Stocks Commodity Spot Price vs. Futures Price: What's the Difference?Futures Contract: Meaning, Definition, Pros & Cons | 5paisa Difference Between Stock and Commodity Markets
What is futures trading?

Futures trading is the buying and selling of a particular type of derivatives contract. These contracts entitle one you to buy or sell a particular asset, such as a stock or commodity, at a particular price at a certain date in the future.
Learn MoreHow to Trade Futures
What is commodities trading?

Commodities trading is the trading of fungible goods in financial markets. This means that any one commodity good is the same as any other one of the same type. For example, any one ounce of gold is the same as another or any barrel of a particular kind of crude oil is the same as another. Commodities are usually traded using futures contracts which allow you to purchase a set amount at a particular price sometime in the future.
Learn MoreCommodity Pool

Key Terms

Commodity Swap
A commodity swap is a type of derivatives contract in which one side agrees to pay a set payment while the other makes payments equal to the value of a commodity at a given date or dates. This is usually used for oil and is used to effectively lock in the price of the commodity in a similar way futures contracts are used.
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Documentary Collection
Documentary collection is a method to buy and sell trade goods. The exporter’s bank gives the title of the goods to the importer’s bank in exchange for the importer’s bank releasing the funds to pay for the goods.
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See Also
Cash Equity: Definition, How it Works in Investing, and Example
Commitments of Traders Report (COT)
The COT is a weekly publication by the Commodity Futures Trading Commission (CFTC) that gives information about the number of futures and options contracts in U.S. derivatives markets. It is one of the fundamental data sources for anyone interested in the U.S. futures or options markets.
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Chicago Mercantile Exchange (CME)
The CME is a major futures trading exchange. Organized as the company CME group, it owns other exchanges such as the New York Mercantile Exchange (NYMEX).
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Futures Spread
A futures spread is a trading strategy that attempts to profit from a change in the difference in price between two futures, known as the spread. They buy one future and sell another, with which one being bought and which one being sold depending on if the trader thinks the spread will widen or narrow.
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Futures Exchange
A futures exchange is a market in which traders buy and sell futures and often other derivatives. They have a similar purpose to stock exchanges.
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Delivery Price
The delivery price is the price at which one party agrees to sell an asset as part of a futures or options contract.
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Warehouse Receipt
A warehouse receipt is a document given by the warehouse storing the commodities used in futures markets. The receipt helps prove to buyers that the requested goods are both secure and of the right quality.
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How to Trade Futures: Platforms, Strategies, and Pros and ConsByTimothy SmithUpdated Sep 20, 2022 Documentary Collection: Definition, Types, and How It WorksByChris B. MurphyUpdated Jul 06, 2022 Best Swing Trading Platforms 2024ByAndrew GrossmanUpdated Jan 25, 2024 How to Open a Swing Trade AccountByAndrew GrossmanUpdated Jun 21, 2023 How to Swing TradeByAndrew GrossmanUpdated Jun 21, 2023

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Soft Commodities Trading

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