Where are commodities traded?
Commodity Exchanges:
- LIFFE (London International Financial Futures and Options Exchange):
- Specialty: Soft commodities like cocoa, wheat, coffee, sugar, and corn.
- NYMEX (New York Mercantile Exchange):
- Specialty: Energy and metals, including crude oil, natural gas, heating oil, RBOB unleaded gas, gold, silver, copper, platinum, and palladium.
- London Metal Exchange:
- Specialty: Non-ferrous metals such as aluminium, copper, tin, nickel, zinc, lead, aluminium alloy, and cobalt.
- ICE Futures US:
- Specialty: Soft commodities like sugar, cotton, cocoa, coffee, and orange juice.
- CBOT (Chicago Board of Trade):
- Specialty: Grains such as corn, soybeans, soybean oil, soybean meal, wheat, oats, and rough rice.
Contract Sizes:
- Definition:
- Commodity futures are traded in contracts, with each exchange setting a standard size.
- Example – Gold Futures:
- Contract size for gold futures is typically 100 troy ounces.
- If gold is trading at $1100 per troy ounce, one contract would be worth $110,000 (1100 x 100 ounces).
- Leverage:
- Due to large contract sizes, small investors often use leverage to trade commodity futures.
- Mini Contracts:
- Some exchanges and brokers offer ‘mini’ contracts, which are smaller in size (usually between 10% and 50% of a standard contract).
- Variability by Commodity:
- Contract sizes vary widely depending on the type of commodity, emphasizing the need to check carefully before placing a trade.
Understanding the specialties of different exchanges and the concept of contract sizes is crucial for traders and investors engaging in commodity markets. It allows for informed decision-making and risk management in commodity trading.
Key factors that influence commodity prices.