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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 Trading News
Corn futures rise, soybean futures fall, while oat and wheat futures are flat ... - Washington Post
 Business Recorder | Corn futures rise, soybean futures fall, while oat and wheat futures are flat ... Washington Post CHICAGO — Grains futures traded mixed in early trading Friday on the Chicago Board of Trade. Wheat for March delivery was unchanged at $6.5350 a bushel; March corn rose 3 cents to $6.3750 a bushel; March oats were unchanged at $3.0075 a bushel; ... Corn rises as soybeans, wheat slide Friday Corn, Soybeans Called to Open Higher on Fed Rate Outlook; Wheat May Rally Soybean futures are trading lower on Wednesday |
Hedgies, Managed Futures Funds Raise Stakes In Gold & Silver - Barron's (blog)
 Wall Street Journal | Hedgies, Managed Futures Funds Raise Stakes In Gold & Silver Barron's (blog) By Murray Coleman Large managed futures funds, including hedge funds, in the past week increased their bullish bets in Comex gold and silver futures, according to data released this afternoon by the Commodity Futures Trading Commission. CFTC PRECIOUS METALS: Funds Stock Up On Precious Metals CFTC BASE METALS: Funds Increase Bullish Bets On Copper |
US GAS: Futures Rebound As February Contract Expires - Wall Street Journal
US GAS: Futures Rebound As February Contract Expires Wall Street Journal Trading can be volatile on the day a contract expires, and the more heavily traded March contract settled 3.8% higher at $2.756/MMBtu. Futures gained as investors turned to the possibility that cooler temperatures on the US east coast and in the south ... Natural gas futures lower for second day on warm weather projection NYMEX February gas contract tumbles despite bullish storage data |
Oil Options Volatility Slips as Futures Settle Little Changed - BusinessWeek
Oil Options Volatility Slips as Futures Settle Little Changed BusinessWeek 27 (Bloomberg) -- Crude oil options volatility fell as the underlying futures settled 14 cents lower, staying within the trading range they have been in for a month. Implied volatility for at-the-money options expiring in March, a measure of expected ... |
CFTC Finds No 'Material Breaches' at Big Futures Firms - Wall Street Journal
 Financial Times | CFTC Finds No 'Material Breaches' at Big Futures Firms Wall Street Journal The Commodity Futures Trading Commission found that all customer funds were in place on the date of the review of each of 70 firms. "It shows that firms understand our rules about how to treat customer funds," Commissioner Bart Chilton, a Democrat, ... No problems found at US futures firms in keeping customer money separate ... CFTC says customer-fund review comes up clean Regulators Find No Material Breaches In Review Of Futures Firms |