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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.
Futures And Commodities Trading News
Regulator Probing Cotton Trading, Losses, Financial Times Says - Bloomberg
Regulator Probing Cotton Trading, Losses, Financial Times Says Bloomberg The Commodity Futures Trading Commission is interviewing cotton industry officials as part of a probe of trading that resulted in losses last year for commodities trader Glencore International Plc (GLEN), the Financial Times reported. |
CFTC: Former Chicago Trader Banned, To Pay $600000 - Wall Street Journal
 Futures Magazine | CFTC: Former Chicago Trader Banned, To Pay $600000 Wall Street Journal A former Chicago trader was ordered to pay a $600000 civil penalty and permanently banned from the commodities industry in connection to an elaborate scheme to trade options without posting the required margin, the US Commodity Futures Trading ... Chicago man fined $600000 for margin call avoidance scheme CFTC Obtains Injunction Against Former Floor Broker for Margin Call Avoidance ... |
JPMorgan lobbied CFTC a day after losses revealed - Reuters
 USA TODAY | JPMorgan lobbied CFTC a day after losses revealed Reuters By Alexandra Alper | WASHINGTON (Reuters) - JPMorgan Chase & Co officials met with the US futures regulator one day after revealing a $2 billion loss on trades booked in London, according to information from the Commodity Futures Trading Commission. JPMorgan Trading Loss Focus of CFTC Investigation CFTC investigating JPMorgan Chase CFTC investigates JPMorgan loss, argues against derivatives loophole abroad |
Trade update to Dow Jones and Intraday market analysis - Inside Futures
Trade update to Dow Jones and Intraday market analysis Inside Futures TRADING COMMODITY FUTURES INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS Abdul Latona has been analyzing commodity markets for the past 7 years focusing on ... |
Norilsk Leads ADR Slump as Commodities Tumble: Russia Overnight - BusinessWeek
Norilsk Leads ADR Slump as Commodities Tumble: Russia Overnight BusinessWeek By Halia Pavliva on May 22, 2012 OAO GMK Norilsk Nickel (NILSY) (NILSY) led declines in Russian equities traded in New York and futures fell after commodities retreated to the lowest since October 2010. The Bloomberg Russia-US Equity Index (RUS14BN) of ... |
Most Commodity Futures Now Down More Than 2% - NASDAQ
Most Commodity Futures Now Down More Than 2% NASDAQ NEW YORK -- Futures in the energy and commodities sectors tumbled Wednesday-- in most cases now down more than 2% on the session--on anxiety that Greece could exit the euro zone and throw the continent's economic outlook into turmoil. |
The Commodity Trade: Wheat Futures Continue To Soar; Ways To Play (WEET, MON ... - ETF Daily News
The Commodity Trade: Wheat Futures Continue To Soar; Ways To Play (WEET, MON ... ETF Daily News Jared Cummans: While most traders have kept their eyes glued to high profile commodities like gold and crude oil,wheat futures have been on an absolute tear. Three different kinds of wheat futures are up more than 10% in the trailing week, ... |
Oil Falls Below $90 as Supplies Rise, Erasing Gains Through 2011 - San Francisco Chronicle
 CBS News | Oil Falls Below $90 as Supplies Rise, Erasing Gains Through 2011 San Francisco Chronicle "We're heading lower because supplies continue to rise and the dollar is surging against the euro, hurting all commodities," said Todd Horwitz, chief strategist at Adam Mesh Trading Group in Chicago. "'I'm looking for prices to fall to the mid-$80s and ... NYMEX-Crude ends below $89/bbl on Iran, economic worry Oil drops below $90 for 1st time since October OIL FUTURES: Futures Slide As Euro-Zone Fears Remain |