- What is an "option"?
- Can anyone advise me on trading commodity futures?
- What is a "commodity future"?
- What is a "futures price"?
- What does being "long" or "short" in commodity futures trading mean?
- What is the purpose of a futures exchange market?
- Why do producers of commodities use futures markets?
What is an "option"?
An option grants the investor the right, but not the obligation, to buy an investment vehicle—such as stocks, bonds, stock indexes, commodities, or currencies, among many other choices of possible investments—at a defined future date.
Can anyone advise me on trading commodity futures?
According to the SEC, all firms and individuals that trade futures with the public must be registered with the National Futures Association.
What is a "commodity future"?
A commodity future is a contract between two parties to buy a commodity at an agreed-upon price today, with delivery and payment at a later date, and with a stated obligation between the parties to sell and buy at a certain point in time.
What is a "futures price"?
A futures price is the agreed-upon price today of a commodity futures contract, and is often called the "strike price".
What does being "long" or "short" in commodity futures trading mean?
After two parties agree on a price for the futures contract, the buyer is said to be long (meaning he expects the price to increase), and the seller is said to be short (meaning he expects the price to decrease).
What is the purpose of a futures exchange market?
A futures exchange market brings buyers and sellers together to efficiently transact futures contracts, and to minimize default by a seller or a buyer
Why do producers of commodities use futures markets?
Many producers use futures markets as a hedge against dramatic price fluctuations, to raise cash for what they produce, and to make their financial affairs more predictable. In terms of pricing, producers of all sizes are on an equal footing, and may come together with a common product to take advantage of the more favorable prices afforded to larger players by being a part of a larger pool of available product.