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Trading Commodity Futures

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					                           Trading Commodity Futures

Traders who are involved in trading commodity futures work on buying as well as selling
of contracts. However, the delivery of the physical goods that are involved in the
transactions will have to take place in the future. Some of the common commodities that
can be traded in commodity futures are metals like gold and copper. Traders may also
transact with other types of raw products like soybeans or live cattle as well as pigs.
Commodity futures trading provides buyers and sellers a way of managing the risks that
are involved in this type of business.

The contracts in this type of market are sold or bought through authorized exchanges
which either provides a trading floor or an electronic trading venue where the
transactions will take place. Trading commodity futures may be somehow similar to the
way trading in stocks are conducted. However, the main difference is that futures are
traded on specified margins. This means that the traders only pay for a fraction of the real
face value of the contracts. Traders also have more advantages when they engage in
commodity futures trading rather than trading in stock, bonds, real estate and other types
of assets.

Lots of traders would like trading commodity futures more than they do with other kinds
of markets because they may have the opportunity to earn bigger profits within a
relatively short duration of time. Traders have this advantage because of their option to
use the leverage that this type of market offers. However, traders have to know what they
are doing because a wrong move may cost them huge losses especially if they cannot
maintain consistency in their decisions on what to buy or to sell or when they are
supposed to sell or to buy.

Commodity futures trading has its own advantages over other types of liquid assets such
as real estate. Traders may be able to have something to trade most of the time because
they can use their profit to transact even without closing a particular position that they are
holding. They would not be able to possibly do this if they are trading with bonds or
stocks. Trading commodity futures may not actually be too complicated because the
number of commodities that can be bought and sold through futures contracts is
manageable. Traders though have the option to diversify to other segments in the market.
They may also have the opportunity to earn profit even if the prices move up or move
down. Whatever the market situation is, traders can earn from their diversified portfolio.

Commodity futures options involves buying and selling futures option contracts. You do
not have to just trade one futures options contract. You can combine different options and
trade them together in what is called trading commodity options. Spread trading is a way
to limit your risk because when you lose in one contract, you profit in another.

				
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