Online Trading Education

Commodities

What are Commodities?

Commodities are defined as an object or resource that is produced from the earth. Most of commodities purchasing and trading is done through speculation. Commodities are considered a valuable resource, and are usually traded based on what is happening with the producer of that goods’ economy, climate, and production status. Example: if a tornado was predicted to blow through the Midwest, a commodities trader would want to contact his or her broker to purchase all the cattle before there could be a disaster in cattle health or beef production. Because commodities are not tangible objects, they are usually traded as commodities futures contracts or as options. Meaning, that like the futures trading systems and options trading systems there are agreements in place to buy or sell at an agreed upon price on a specific market.

The commodities markets are in Chicago (Chicago Board of Trade) and New York (New York Board of Trade, and the New York Mercantile Exchange).

Hot Topics in Commodities Today

Oil Prices: Oil prices are determined by: the current supply and demand of oil, what is available in oil reserves, and the speed of oil production. Another important aspect about oil to remember is that oil prices change daily, so a change in an economic standing in a nation that produces or relies heavily on oil will impact the commodities market. For the U.S. economy, oil prices impact almost every good and service, so this is an important commodity price to keep watch on.

Popular Examples of Commodities

OIL
WHEAT
GOLD