Commodity futures traders buy and sell contracts.However, the physical delivery of the transaction must take place in the future.Some common commodities that can be traded in commodity futures are metals such as gold and copper.Traders can also trade with other types of raw materials, such as soybeans or live cattle and pigs.Commodity futures trading provides a way for buyers and sellers to manage the risks of such trades.
Contracts in such markets are bought and sold on authorized exchanges that provide trading venues or electronic trading venues.Commodity futures trading may resemble stock trading to some extent.The main difference, however, is that the margins on futures trading are specific.That means traders pay only a fraction of the actual face value of the contract.
Many traders prefer to trade commodity futures over other markets because they may have the opportunity to make larger profits in a relatively short period of time.Traders have this advantage because they can choose to use the leverage these markets provide.However, traders must know what they are doing because a wrong move can cost them a lot of money, especially if they are inconsistent in deciding what to buy or sell and when to sell or buy.
Commodity futures trading has its advantages over other liquid assets such as real estate.Traders may have something to trade most of the time because they can use their profits to trade, even without closing their particular positions.If they were trading in bonds or stocks, they wouldn’t be able to do that.Commodity futures trading may not actually be complicated because the amount of goods bought and sold through futures contracts is manageable.However, traders have the option of diversifying into other parts of the market.
Commodity futures options include the buying and selling of futures options contracts.You don’t have to trade just one futures contract.You can trade commodity options by combining different options.Spread-betting is a way of limiting risk because when you lose in one contract, you gain in another.