Commodity trading has become a “niche area in the finance world that…has been gaining more interest among individuals who are seeking alternative trading instruments from the usual stocks and bonds,” says Timothy Ho, economics/finance professional.
Commodities categories include precious metals, oil and gas, and soft commodities (cocoa beans, coffee, sugar, wheat, etc.). Some commodities are considered “the fifth asset class,” and they can include cash, equities, and property.
A futures contract settlement will occur in the future but traded today. There are also spot contracts that settle immediately called “spot contracts.” Most investors work with a commodities futures broker, someone who understands your financial portfolio goals and can place trades for you for a relatively small fee on futures contracts for your account
Some of the risks of futures trading include:
- Exchange rates
- Geo political events
- Supply and demand
- Weather
- Leverage and technicals
- Price fluctuations
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