Commodity Futures

Written by Jacey Harmon
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Commodity futures are a contract to buy or sell a particular commodity at a specific price on a specific date. A commodity can be any physical good that is available for sale. For instance oil, corn, lumber, and gold are all types of different commodities. Trading in commodities futures is utilized by speculators for profit and hedgers to reduce risk on adverse price fluctuations.

Commodity futures contracts can be traded at a variety of locations throughout the United States. Each exchange specializes in different styles of futures trading, ranging from commodity futures to index futures. The Chicago Board of Trade (CBOT) is where grains and soybeans futures can be traded. The Chicago Mercantile Exchange (CME) trades livestock and dairy products. The New York Mercantile Exchange is where energy futures such as oil and natural gas are traded.

Commodities futures are traded every day on the various exchange floors. The daily exchange of futures trading equals varying prices of a specific commodity from day to day. These price changes have affects on every aspect of our lives from what we pay at the gas pump to what we pay for corn at the grocery store. Quotes for commodities futures can be found through brokers, financial papers, or online at financial based websites.

Regulating Commodities Futures Trading.

The Commodity Futures Trading Commission (CFTC) is the regulatory agency that oversees commodity trading. The CFTC is similar to the Securities and Exchange Commission (SEC) that oversees the stock market. The CFTC approves futures contracts available for trade on the various exchange floors. The CFTC also handles consumer protection as well as providing free pamphlets and booklets that educate possible traders about the risks and rewards of commodities trading.

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