Commodities

COMMODITIES
From the orange juice we drink to the gas we use to power our vehicles and heat our homes, commodities play important roles in our daily lives. They can be found literally all over theworld, and can be traded on the global marketplace as part of a diversified investment portfolio. In fact, billions of dollars are invested in commodities every day. While they can be traded on eitherspot (real-time) or futures (options) markets, most individual commodities are traded in the form of futures, where what is being traded is not the commodity itself but rather a contract to buy orsell it for a certain price by a stated date in the future. This carries the potential for wild market fluctuations, but it also offers exciting opportunities for investors willing to ride out
marketvolatility in anticipation of rewards. (DRAKOLN, 2012)

Commodities are hard assets ranging from wheat to gold to oil. Things you wouldn't eat, such as cotton. Commodities also include mined metalproducts, including gold, silver and aluminum. This includes another important commodity that comes out of the earth, oil. (AMADEO, 2010).Commodities are needed by modern societies and they greatlyfluctuate in price. The commodity markets help to maintain price stability through forward and futures contracts by allowing suppliers to lock the price of their commodity before they can deliver it tothe consumer, which also fixes the future price for consumers. Some examples of commodities in the agricultural sector are: cattle, coffee, corn, cotton, soybeans, sugar and wheat. In the energy sectorthe commodities are: coal, crude oil,gasoline,heating oil and natural gas.In the metal sector some commodities are:aluminium,copper,gold,nickel,palladium,platinum,silver,steel, zinc.(ESCOBAR,2012)ANALYSIS

Each commodity has its own tick and standard contract size, which is the amount covered by a standard futures contract. Some prices, like soybean meal, are listed in dollars per ton,...