Commodity futures classification
Commodity Futures - IntroductionCommodity Futures are the oldest form of futures contracts in the world, both ancient and standardized modern versions. Today, commodity futures are traded in every major market around the world covering almost every conceivable commodity from live cattle to oil. Indeed, commodity futures are definitely one of the most important derivative instruments in the world today, contributing to stable commodity prices and a safe secure market for both producers and buyers.
This tutorial shall explore in depth what Commodity Futures are in futures trading, why trade commodity futures, the different kinds of commodity futures as well as how commodity futures came about.
What are Commodity Futures?Commodity futures are a broad category of futures contracts that deal with the trading of futures contracts on different physical commodities. Indeed, futures contracts existed in the first place as agreements between buyers and producers to trade a certain product upon "harvest" at a fixed price. This makes commodity futures the oldest form of futures contract that ever existed.
The term "Commodity Futures" does not refer to a specific kind of futures contract but rather a broad category of futures contracts written on physical commodities. Any specific futures contract that deals with a physical product, such as Live Cattle Futures, are classified as "Commodity Futures". In fact, there are five main types of commodity futures; Grains Futures, Metal Futures, Energy Futures, Softs Futures and Livestock futures. Under each type of commodity futures, there are multiple specific futures contracts and markets. Commodity futures is truly a huge family of futures contracts and perhaps the largest of the two main category of futures contracts, the other being Financial Futures.
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