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How does commodity market function?

Posted on November 17, 2022 by Author

How does commodity market function?

Commodities markets allow producers and consumers of commodity products to gain access to them in a centralized and liquid marketplace. These market actors can also use commodities derivatives to hedge future consumption or production. Speculators, investors, and arbitrageurs also play an active role in these markets.

How is commodity trading done?

The trading in commodities in India takes place in either spot market, or futures markets. In spot markets, the commodity trading happens instantly and in exchange for cash. Track prices of commodity future live to understand how the prices move.

How to invest in commodity market?

Like a stock, one can invest in a commodity through the commodity bourses. The commodities market works just like any other market. It is a physical or a virtual space, where one can buy, sell or trade various commodities at current or future date. One can also do commodity trading using futures contracts.

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What are commodities futures and how do they work?

Commodities futures are agreements to buy or sell a raw material at a specific date in the future at a particular price. The contract is for a set amount. The three main areas of commodities are food, energy, and metals. The most popular food futures are for meat, wheat, and sugar.

What are the characteristics of commodity market?

These characteristics are homogeneity, price fluctuations, open supply, and durability. The commodity market, though, differs from money markets in terms of the underlying instrument; the underlying concepts of trading are pretty much the same. The concept of spot price, future price, expiry, strike price

How does a commodities brokerage work?

The commodities broker relays the order to a desk clerk on the floor of a commodities exchange. The desk clerk relays the order to a floor broker standing in the pit where the particular commodity trades.

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