Energy
Energy commodity trading via CFDs are available on Crystal Ball Markets. Trade a variety of popular Energy CFDs with leverage like Brent Crude, WTI, Natural Gas and more...
FAQs
What is a Commodity?
A commodity is an item which is traded for the purpose of final consumption or usage in the production process of another final product. They can be freely occurring in nature, as a resource item to be mined or as a farm produce to be grown and harvested. Prices of commodities usually play an important role in the pricing of other financial market products. This is because of the role they play as intermediate raw materials in production processes. Therefore, a change in their prices could in fact have an impact on the correlated financial markets and the wider economy of these countries. In fact, some currencies are now referred to as commodity currencies, as their prices are strongly correlated with the commodity that the country depends on heavily. For Instance, the South African Rand, Canadian Dollar, or the Norwegian Krone.
The History of Commodity Exchanges
The oldest commodity exchange was established in 1848. Known as the Chicago board of trade (CBOT). It dealt mostly on futures and options on commodities like cocoa, sugar, rice, maize, ethanol, and other metals like gold and silver. It was merged with the Chicago Mercantile exchange in 2007, and is now called the CME Group.
The CME was established in 1898, as a foremost physical agricultural commodities exchange, for butter and Egg. Following the merger, the CME group was considered the largest ‘Paper’ (futures and options) exchange for a lot of commodity futures and financial derivatives on currencies.
On the other hand, the New York Board of Trade (NYBOT) was created in 1870 and initially known as the Cotton Exchange. It was later merged with the Coffee, Sugar and Cocoa Exchange. As of now, it mostly deals with physical and paper contracts for the above agricultural commodities and orange juice.
The New York Mercantile Exchange (NYMEX) was formed in 1872 with a focus on mostly dairy and farm animal products. It merged with the CME group after the global financial crises and the great recession of 2008/2009 to form the biggest paper and physical commodity exchange in the world.
Other notable exchanges include the Tokyo Commodity Exchange (TOCOM) founded in 1951, the London International Financial Futures and Options Exchange, founded in 1982 and most recently, the Intercontinental Exchange (ICE) founded in 2000.Types of Commodities
Commodities are broadly categorized into two; soft and hard commodities. Soft commodities refer in general to agricultural farm produce like cocoa, corn, coffee, wheat, livestock, cattle, orange juice, to name a few, mostly considered a renewable resource. On the other hand, hard commodities are generally considered to be non-renewable natural resources extracted or mined from the earth, like crude oil, iron ore, copper, gold, silver and other precious metals.
Sub-Categories of Commodities
Commodities can be further sub categorised as follows:
Metals: Base/ Non-precious metals like Aluminium, Cobalt, Nickel and Copper. Precious metals like silver, gold, and platinum.
Energy: Crude Oil and Refined Petroleum Products (Gasoil, Gasoline, Natural Gas, Heating Oil).
Agricultural Commodities: Cattle, Livestock, cocoa, coffee, sugar, orange juice.How Do You Trade Commodities?
There are a number of ways to trade commodities. Institutional Investors would usually trade paper commodities on a futures exchange, via future contracts which represents a contractual obligation to sell or buy a fixed volume of a commodity at an agreed price and delivery at a date in the future.
On the other hand, other investors can gain exposure and take a position on the anticipated price movement of a particular commodity through margin CFDs (Contracts for Differences), as offered by Crystal Ball Markets on our state-of-the-art online trading platform. Mobius Trader 7 (MT7). The pricing of these commodity CFDs are based on real time prices of futures contracts on major exchanges across the globe, namely the Chicago Mercantile Exchange (CME) Group, the Intercontinental Exchange (ICE), to name a few.
Kindly note that when trading commodity CFDs, you take positions based on expected movements in prices of the underlying commodity futures contracts without actual ownership.
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