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Commodity Futures: How They Work

Why Do Prices of the Things You Need the Most Change Every Day?

Commodity futures are agreements to buy or sell a commodity at a specified time in the future for a specified price. The contract is for a fixed amount. Indicates when the seller will deliver the asset. It also sets the price. Some contracts allow payment in cash instead of delivery.

The three main areas of raw materials are food, energy, and metals. The most popular food futures are meat, wheat, and sugar. commodity trading time in India Most energy futures is for oil and gasoline. The metals that futures contracts use include gold, silver, and copper. Buyers of food, energy, and metals use futures contracts to price the products they buy. This reduces the risk of price increases. The sellers of these products use futures contracts to guarantee that they will get the agreed price. Eliminate the risk of falling prices. Commodity prices change every week or even daily. Contract prices also change. This is why the price of meat, gasoline, and gold changes so often.

How they work

When the price of the underlying commodity rises, the buyer of the futures contract makes money. You receive the product at the lowest agreed price and can now sell it at the highest price in the current market. low brokerage commodity trading When the price goes down, the futures seller makes money. You can buy the commodities at the lowest current market price and sell them to the futures buyer at the highest agreed price.

If commodity traders delivered the product, few would. Instead, they can perform the contract by providing proof that the product is in stock. You can also choose to pay the payment in cash or offer another contract at market price.


Commodity Bags

Futures contracts are traded on a commodity futures exchange. These include the Chicago Mercantile Exchange, the Chicago Board of Trade, and the New York Mercantile Exchange. Now they all belong to the CME group. The Commodity Futures Trading Commission regulates them. Buyers and sellers must register with the CFTC.

The contracts go through the exchange's clearinghouse. Technically, the clearinghouse buys and sells all the contracts. Exchanges facilitate the buying and selling of contracts by making them fungible. In other words, they are interchangeable. But they must be for the same products, quantity, and quality. Green India Commodity They must also be applied to the same month of delivery and the same place of delivery. Flexibility allows buyers to "offset" contracts. They then buy and sell the contracts. You can refund or cancel the contract before the agreed date. For this reason, futures contracts are derivatives.

How futures contracts affect the economy

Companies use futures contracts to guarantee a guaranteed price for commodities such as oil. Farmers use them to set a sale price for their livestock or grain. Futures contracts guarantee that they can buy or sell the product at a fixed price. best commodity trading broker in India plans to transfer ownership of the contracted goods. The agreement also allows them to know the income or costs associated with it. For them, contracts reduce considerable risk.

Hedge funds use futures contracts to better control the commodity market. You have no intention of transferring assets. Instead, they plan to buy an OTC contract at a price that will make them money. commodity exchange in India In a way, they are betting on the future price of this product. Commodity price estimates and forecasts are the effects of commodity futures contracts on the economy. Traders and analysts determine these values.

How to invest

The safest way to invest in commodity futures is to use commodity funds. These can be exchange-traded commodity funds or mutual funds. These funds cover the wide range of commodity futures that occur at any given time.

Trading commodity futures and options are very complicated and risky. Commodity prices are very volatile. The market is full of fraudulent activity. If you are not completely sure what you are doing, you may lose more than your initial investment.

Before investing, read the Commodity Profiles and Commodity Futures Daily Trading. Also, read the Guide to

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