Commodity trading has been around for centuries, long before modern financial markets evolved. As ancient empires developed trade routes for exchanging their goods, commodity trading began to take shape. A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers.
Commodity trading is the exchange of different assets, typically futures contracts, that are based on the price of an underlying physical commodity. With the buying or selling of these futures contracts, investors make bets on the expected future value of a given commodity. If they think the price of a commodity will go up, they buy certain futures—or go long—and if they think the price of the commodity will fall, they sell off other futures—or go short.
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Topic: Commodity Trading (Read 237 times)