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Trading Commodity Futures Via The Internet
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Before online commodities and future trading became the high-rolling, high-stake investment ground that it is today, its early proprietors were farmers of the 1800’s.
These farmers would grow their crops and bring these to the market come harvest time in the hope of selling them. But the main concern then was that without an indicator, they could not efficiently gauge how much of their goods are needed therefore resulting either to shortages or excesses, both causing losses for the farmer.
With shortages causing loss of the opportunity to earn more and excesses causing meats and crops to rot and dairy products to spoil. Also, when a certain produce is out of season any product made from them would be priced so high due to its scarcity.
A central marketplace was subsequently created for farmers to take their harvests and sell them either for immediate or forward delivery. Immediate delivery is what is known now as the spot or cash market and forward delivery is now called futures market.
This concept helped stabilize prices for commodities that were out of season as well as served as an effective indicator of supply and demand therefore saving farmers thousands of dollars that would otherwise go to spoilage.
From forward contracts evolved commodities and futures contracts. Forward contracts are effectively agreements to buy now for payment and delivery at a specified date in the future, which is usually three months from the date of the contract.
These were originally only for food and agricultural products but now they have expanded to include financial instruments. Forward contracts have evolved and have been standardized into what we know today as futures contracts.
Basically, when dealing in online commodities or futures trading, a contract must have a seller (the producer) and a buyer (the consumer). If you purchase a futures contract, you are agreeing to buy a commodity that is not there yet for a specific price.
Although most futures contracts are based on an actual commodity, some futures contracts also are sold based on its future value based on stock market indices.
Unless you are a businessman who is into the trade of the actual commodity you purchased, you won't actually use the goods (if you’re the buyer) or actually provide the commodity (if you’re the seller) for which you're trading a futures contract.
Remember, buyers and sellers in the futures market primarily enter into futures contracts to minimize risk or speculate rather than to exchange physical goods.
On the other hand, online commodities differ from futures trading in that commodities trading may involve the physical delivery of the goods. In which case a receipt is issued in the favor of the buyer. This receipt enables the buyer to take the commodity from the warehouse.
Traders in online commodities and futures market can use different strategies to take advantage of rising and declining prices. The most common are known as going long, going short and spreads.
When an investor enters a contract by agreeing to buy and receive delivery of the commodity at a set price - it means that he or she is trying to earn from an anticipated future price increase, he or she is going long.
When he or she is looking to make a profit from declining price levels, this is going short. The speculator sells high now so he or she can repurchase the contract in the future at a lower price.
When one makes a spread, however, he or she is trying to benefit from the price difference between two separate contracts of the same commodity.
As an online commodities or futures trader, therefore, you should be armed with a firm grasp of how the market and contracts function.
American Futures Trading News
US Futures Following Asia, Europe Lower; More Conditions For Greece - Wall Street Journal
US Futures Following Asia, Europe Lower; More Conditions For Greece Wall Street Journal By Barbara Kollmeyer US stock futures fell Friday, tracking losses in Asia and Europe after more conditions were demanded for Greece to get fresh aid. Consumer-sentiment data and comments from Federal Reserve Chairman Ben Bernanke are in the spotlight ... |
NYMEX-Crude falls on Greek, oil demand worries - Reuters
 Moneycontrol.com | NYMEX-Crude falls on Greek, oil demand worries Reuters Hedge funds and other large investors rdfaised their net long positions on NYMEX crude oil futures and options by 4440 contracts, to 205709, in the week to Feb. 7, the Commodity Futures Trading Commission said. * The US trade deficit widened to $48.8 ... Crude oil futures surge on Greek deal, U.S. employment Oil hit with profit taking selling on Greece concerns OIL FUTURES: Nymex Crude Pares Gains Following Inventory Build |
Crop and livestock markets trading lower on Friday - CattleNetwork.com
 Business Recorder | Crop and livestock markets trading lower on Friday CattleNetwork.com USDA did not change US supply and demand numbers on Thursday, but South American production was lowered as expected. March is 5 1/2 cents lower at $12.22 and November is 7 cents lower at $12.31 1/2. Wheat futures are trading lower at midday. Crop markets to open lower on Friday Record wheat stocks offset South American drought Morning markets: wheat shakes off some pre-Wasde nerves |
Foreclosure Settlement, Libor Probe, EBA 'Boost': Compliance - BusinessWeek
Foreclosure Settlement, Libor Probe, EBA 'Boost': Compliance BusinessWeek The investigation is being handled by the US Securities and Exchange Commission, the US Commodity Futures Trading Commission, the US Justice Department, Japan's Financial Supervisory Agency and the UK Financial Services Authority. |
US STOCK FUTURES: HOT STOCKS TO WATCH - Wall Street Journal
US STOCK FUTURES: HOT STOCKS TO WATCH Wall Street Journal Among the companies whose shares are expected to actively trade in Thursday's session are Diamond Foods Inc. (DMND), Groupon Inc. (GRPN) and Visa Inc. (V). Diamond Foods said it will appoint a new chief executive and chief financial officer and will ... |
US Stock Futures Track Losses In Europe, Asia Over Greece Conditions - Wall Street Journal
US Stock Futures Track Losses In Europe, Asia Over Greece Conditions Wall Street Journal By Barbara Kollmeyer US stock futures were down Friday, tracking losses in Asia and Europe after more conditions were demanded for Greece to get fresh aid. Consumer-sentiment data and comments from Federal Reserve Chairman Ben Bernanke are in the ... |
Bankers air fears over scope of swaps rules - Reuters
Bankers air fears over scope of swaps rules Reuters ... Commodity Futures Trading Commission new oversight powers for the opaque $700 trillion derivatives market. That includes broad authority to regulate any swaps activities overseas so long as it has a "direct and significant" impact on US commerce. American swap regulation: a class apart |
EU wheat cooled by USDA, ignores Algeria buying - Reuters Africa
EU wheat cooled by USDA, ignores Algeria buying Reuters Africa PARIS Feb 10 (Reuters) - European wheat fell on Friday as a hike in the US government's estimate of world wheat stocks encouraged the market to track losses in US futures and shrug off a massive import purchase by Algeria, traders said. |