What are commodity derivatives?
commodities are investment tools that allow investors to benefit from certain items without owning them. This type of investment dates back to 1848, when the Chicago Board of Trade was established. Initially, the idea of commodity derivatives was to provide farmers for risk protection. They could promise to sell crops at a predetermined price in the future. Most people who use this investment tool are speculators of price. These people usually focus on supply and demand and try to predict whether prices will go up or down. When the prices of a certain commodity move to their advantage, they earn money. If the price moves in the opposite direction, it will lose money. Although this person is a contractual buyer to the buyer, he may buy an OR sell commodity. It does not have to pay the full value of the amount of the commodity in which it invests. Only a small percentage, known as the price of the margin, must apply.
The contract of the contract is a person who receives a margin. Agrees that in urA perial date will buy or sell the commodity specified in the contract at a certain price. Both sides are generally required to honor the agreement despite losses.
For example, an investor can buy a contract from a seller that gives him rights for one ton of coffee beans for $ 1,000 (USD) 1 July. Although the value of the contract is $ 1000, the buyer may be required to pay only $ 100. 1 July Seller will transfer the rights of one ton of coffee beans to the buyer.
If the current value of a ton of coffee beans is 1. July $ 1,500, the buyer can sell on the market and earn $ 500 profit. If the value of the coffee beans on that day is only $ 800, this person will be purchased with a loss. It may decide to seize coffee beans, which is rare. It can sell on the loss market. In most cases he becomes a seller and will try to find the buyer.
trading in commodity derivatives allows a person to use Malou amount of money for the potential to raise considerable profits. However, this kind of investment is considered a high risk. If prices are not for the benefit of the investor, it may suffer considerable losses. Commodities that are open to this type of investment include cotton, soy and rice. In some countries, although these commodities are available, this type of trading is illegal.