What is a Commodity
A commodity is a raw material used to produce a final product. A commodity may be a metal, an agricultural commodity, or an energy commodity. Commodities usually meet three important criteria:
1. Tradability
2. Deliverability
3. Liquidity
Categories of Commodity Assets
All commodities are divided into 3 major categories:
1. Precious, Rare and Industrial Metals
1.1 Precious Metals
Gold, Silver, Platinum, Palladium,
1.2 Industrial Metals
Copper, Steel, Aluminium, Cobalt, Nickel
1.3 Rare metals
Rhodium, Titanium, Indium, Germanium, Cadmium, Magnesium, Chromium, Beryllium, Niobium, Manganese, Silicon, Selenium, Lithium, Vanadium, Wolframite, Tantalum, Gallium, Tellurium.
2. Agricultural and LiveStock Commodities
2.1 Agricultural Commodities
Corn, Oats, Rice, Soybeans, Soybean Oil, Wheat, Milk, Cocoa, Coffee, Cotton, Sugar, Orange Juice
2.2 Livestock Commodities
Lean Hogs, Frozen Pork, Live Cattle
3. Energy Commodities
There are several different energy commodities such as Brent Crude Oil, WTI Crude Oil, Natural Gas, Heating Oil, Ethanol, Propane, and Purified Terephthalic Acid.
Major Commodity Exchanges
Commodities exchanges are financial markets offering financial products such as options and futures contracts and using as their underlying asset a commodity asset. Here are the world’s major commodities exchanges and links to their home page.
|
Commodity Exchange |
Visit |
Physical Location |
|
Chicago Mercantile Exchange (CME) |
Chicago, US |
|
|
New York Mercantile Exchange (NYMEX) |
Part of the CME Group |
New York City, US |
|
London Metal Exchange (LME) |
London, UK |
|
|
Intercontinental Exchange (ICE) |
Atlanta, US |
|
|
Multi Commodity Exchange (MCX) |
Mumbai, India |
|
|
Australian Securities Exchange (ASX) |
Sydney, Australia |
Commodities trading
Commodities can be traded using several different ways:
1. Spot trading
Spot transactions involve direct commodity delivery.
2. Forward Contracts
A forward contract is a predetermined agreement between two parties in order to exchange a given quantity of a commodity for a pre-fixed future date and for a price defined today.
3. Derivatives Contracts (Futures & Options)
Derivatives are financial products like futures, classic options, and binary options that behave like the previous Forward Contracts. The difference is that a future or an option can be bought or sold at any time and you buy the right and not the obligation to deliver a commodity asset in the future. Futures and Options are highly used for hedging against market risk but also for market speculation.
• Trading Commodities
TradingFibonacci.com
