Futures and Commodities Trading (2024)

Trading
Futures and Commodities Trading

Futures and commodities can be very complex and volatile asset classes that differ significantly from investing in stocks and bonds. This means that investors need to do significantly more research before wading into these types of investments.

Guide to Futures and Commodities Trading

How to Use Index FuturesByNeil O'HaraUpdated Jan 15, 2022How to Calculate the Notional Value of a Futures ContractByThe Investopedia TeamUpdated May 27, 2023The Formula for Converting Spot Rate to Forward RateBySean RossUpdated Jan 28, 2022A Quick Guide for Futures QuotesByAndrew BeattieUpdated Jul 07, 2022The Investor's Guide to FuturesByPeter GrattonUpdated Feb 12, 2024

Frequently Asked Questions

Is commodity trading the same as futures trading?
No, though they are related. Futures are a type of financial derivative in which you agree to buy or sell a certain asset at a certain price at a particular time in the future. Commodities are a type of asset representing fungible goods, such as oil, iron ore, or wheat. Commodities are usually traded using futures.
Learn More:Commodity Spot Prices vs. Futures Prices: What's the Difference?
Which commodity is the best to trade?
There is no best commodity to trade in the same way there is no best stock to trade. The commodities market is volatile and significantly affected by economic cycles. This means that no one commodity will be the easiest to trade or the most profitable.
Learn More:Analyzing the 5 Most Liquid Commodity Futures
See Also
Trading Commodities and Financial Futures
What is futures trading?
Futures trading is the buying and selling of a particular type of derivatives contract. These contracts entitle one you to buy or sell a particular asset, such as a stock or commodity, at a particular price at a certain date in the future.
Learn More:How to Trade Futures
What is commodities trading?
Commodities trading is the trading of fungible goods in financial markets. This means that any one commodity good is the same as any other one of the same type. For example, any one ounce of gold is the same as another or any barrel of a particular kind of crude oil is the same as another. Commodities are usually traded using futures contracts which allow you to purchase a set amount at a particular price sometime in the future.
Learn More:Commodity Pool

Key Terms

Commodity Swap
A commodity swap is a type of derivatives contract in which one side agrees to pay a set payment while the other makes payments equal to the value of a commodity at a given date or dates. This is usually used for oil and is used to effectively lock in the price of the commodity in a similar way futures contracts are used.
Learn More
Documentary Collection
Documentary collection is a method to buy and sell trade goods. The exporter’s bank gives the title of the goods to the importer’s bank in exchange for the importer’s bank releasing the funds to pay for the goods.
Learn More
Commitments of Traders Report (COT)
The COT is a weekly publication by the Commodity Futures Trading Commission (CFTC) that gives information about the number of futures and options contracts in U.S. derivatives markets. It is one of the fundamental data sources for anyone interested in the U.S. futures or options markets.
Learn More
Chicago Mercantile Exchange (CME)
The CME is a major futures trading exchange. Organized as the company CME group, it owns other exchanges such as the New York Mercantile Exchange (NYMEX).
Learn More
Futures Spread
A futures spread is a trading strategy that attempts to profit from a change in the difference in price between two futures, known as the spread. They buy one future and sell another, with which one being bought and which one being sold depending on if the trader thinks the spread will widen or narrow.
Learn More
Futures Exchange
A futures exchange is a market in which traders buy and sell futures and often other derivatives. They have a similar purpose to stock exchanges.
Learn More
Delivery Price
The delivery price is the price at which one party agrees to sell an asset as part of a futures or options contract.
Learn More
Warehouse Receipt
A warehouse receipt is a document given by the warehouse storing the commodities used in futures markets. The receipt helps prove to buyers that the requested goods are both secure and of the right quality.
Learn More

How to Trade Futures: Platforms, Strategies, and Pros and ConsByTimothy SmithUpdated Sep 20, 2022Documentary Collection: Definition, Types, and How It WorksByChris B. MurphyUpdated Jul 06, 2022Best Swing Trading Platforms 2024ByAndrew GrossmanUpdated Jan 25, 2024How to Open a Swing Trade AccountByAndrew GrossmanUpdated Jun 21, 2023How to Swing TradeByAndrew GrossmanUpdated Jun 21, 2023

Explore Futures and Commodities Trading

AllFinancial Futures TradingMetals TradingEnergy Trading

Soft Commodities Trading

4 Best Futures Trading PlatformsByAndrew GrossmanUpdated Jan 25, 2024Oil Price Analysis: The Impact of Supply and DemandByGreg McFarlaneUpdated May 01, 2023Chicago Mercantile Exchange: Definition, History, and RegulationByJames ChenUpdated Jul 12, 2022Genetically Modified Food (GMF): Overview, Controversy ByJames ChenUpdated Jul 18, 2022Staple Thesis: Meaning, Example, CritiqueByJames ChenUpdated Dec 04, 2022How a Commitments of Traders (COT) Report Works, Types, ExampleByAdam HayesUpdated Jul 11, 2022Can Mutual Funds Invest in Options and Futures?ByAndriy BlokhinUpdated Sep 29, 2022Commodity Swap: Definition, How It Works, ExampleByJames ChenUpdated Jul 07, 2022Analyzing the 5 Most Liquid Commodity FuturesByAlan FarleyUpdated Jul 26, 2022Association of Futures Brokers and Dealers (AFBD)ByJames ChenUpdated Jul 23, 2022Last Trading Day: Overview and Examples in Option TradingByCory MitchellUpdated May 25, 2022What Is the Baltic Dry Index (BDI), and Why Is It Important?ByCarol M. KoppUpdated Oct 31, 2021Spot Delivery Month: What It is, How It Works, ExampleByJason FernandoUpdated May 30, 2022Spot Commodity: What It is, How It Works, ExampleByJason FernandoUpdated May 28, 2023Delivery Option: What it Means, How it Works, ElementsByJames ChenUpdated May 26, 2022Lock Limit: What It Is, How It Works, ExampleByCory MitchellUpdated Nov 30, 2021Commercial Hedger: Meaning, Example, FAQsByJames ChenUpdated Jul 30, 2022Actuals: What They are, How They Work, Different MarketsByJames ChenUpdated Apr 11, 2022Itayose: What It is, How It Works, RulesByAdam HayesUpdated Apr 27, 2022Delivery Notice: What It Is, How It Works, ExampleByJason FernandoUpdated May 23, 2022Against Actual: What It is, How It Works, ExampleByJason FernandoUpdated Apr 13, 2022Delivery Point: What It Is, How It Works, ExamplesByJames ChenUpdated Jul 19, 2022Why do companies enter into futures contracts?ByThe Investopedia TeamUpdated Oct 18, 2022Forward Spread: What It Is, How It Works, ExampleByCory MitchellUpdated Jul 20, 2022Futures Exchange: Overview of How it Works, HistoryByGordon ScottUpdated Jul 12, 2022Initial vs. Maintenance Margin for a Futures Contract: What's the Difference?ByJames ChenUpdated May 14, 2023How to Use Commodity Futures to HedgeByShobhit SethUpdated Jan 26, 2022How Risky Are Futures?ByThe Investopedia TeamUpdated Jul 09, 2023Calendar Spreads in Futures and Options Trading ExplainedByJames ChenUpdated Feb 13, 2021Advance Commitment: What It is, How It Works, ExampleByCory MitchellUpdated Dec 29, 2021Basis Quote: What It is, How it Works, ExampleByJason FernandoUpdated Apr 21, 2022What Is COMEX? Definition, History, and Examples of Metals TradedByWill KentonUpdated May 19, 2022What Is a Commodity Index, Its Functions, Major Examples?ByAdam HayesUpdated Oct 21, 2023Trading the Soft Commodity MarketsByHank KingUpdated Aug 25, 2021Are You Ready to Trade Futures?ByHans WagnerUpdated Jan 01, 2022BackpricingByJason FernandoUpdated May 01, 2022Carrying Charge: What it Means, How it Works, ExampleByJason FernandoUpdated Apr 10, 2022Cash CommodityByJames ChenUpdated Apr 13, 2022Cash Delivery: Meaning, Example, Pros and ConsByDaniel LibertoUpdated May 26, 2022Corner: What It is, Regulations, ExamplesByElizabeth BlessingUpdated Nov 30, 2021Corner A Market: What it is, How it Works, LegalityByJames ChenUpdated Apr 26, 2022Dalian Commodities Exchange: Meaning, HistoryByLucas DowneyUpdated Jun 20, 2022E-Mini: Definition and Uses in Futures TradingByJames ChenUpdated May 16, 2022First Notice Day: What It Is and How It WorksByJames ChenUpdated Apr 21, 2022Intercommodity Spread: What It Is, How It Works, TypesByJames ChenUpdated May 25, 2022Inverted Market: Causes and ExampleByCory MitchellUpdated May 10, 2023Limit Up: What It Is, How It Works, ExampleByJason FernandoUpdated Dec 24, 2023What Is Physical Delivery? Definition and How It Works in TradingByJames ChenUpdated May 27, 2022Retender: What it Means, How it Works, ProceduresByJames ChenUpdated May 23, 2022Short The Basis: What It Means, How It WorksByAkhilesh GantiUpdated Mar 31, 2023Variable Price Limit: What It is, How It WorksByJason FernandoUpdated Apr 26, 2022Forward Delivery: What it Means, How it Works, ExampleByCory MitchellUpdated Jun 30, 2023Back Months: What They are, How They WorkByJason FernandoUpdated Jul 06, 2023Outright Futures Position: What it Means, How it Works, ExampleByCory MitchellUpdated May 11, 2022Commercial Trader: What It Is, How It Works, ExampleByCory MitchellUpdated Apr 03, 2023Non-Commercial Trader: What it is, How it WorksByJames ChenUpdated May 30, 2022Full Carry: What It is, How It Works, FAQsByJames ChenUpdated Jul 06, 2023Commodity PoolByJames ChenUpdated Apr 27, 2022

Futures and Commodities Trading

Financial Futures TradingMetals TradingEnergy TradingSoft Commodities Trading

Trading

Technical AnalysisOptions and DerivativesFund TradingStock TradingFixed Income TradingGuide to Forex TradingTrading SkillsTrading Strategies