How To Trade Oil Commodities – CFD is a complex instrument. You can lose your money quickly because of leverage. Make sure you understand how this product works and whether you can afford to risk losing money. CFD is a complex instrument. You can lose your money quickly because of leverage. Make sure you understand how this product works and whether you can afford to risk losing money.
The commodity market can be divided into two categories: hard and soft. Here we explore soft raw materials – natural products such as wheat, cocoa and palm oil. Learn how to trade soft commodities with us.
How To Trade Oil Commodities
Soft commodities are natural products that are grown such as sugar, wheat, corn, palm oil, soybeans, livestock and more. They are informally referred to as ‘soft’. A key feature of soft commodities is that they are grown (and nurtured or raised), not mined.
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With soft commodities necessary for daily sustenance, the availability and scarcity of the same commodity allows traders and investors to speculate on their future. This is because soft commodities face many risks that affect their supply, such as erratic weather patterns and land degradation – which causes volatility in the market.
Sugar Price No. Contract 11 is used worldwide as the benchmark contract for raw sugar trading. The futures contract is traded on the Intercontinental Exchange (ICE) and each contract size is 112,000 pounds.
The C Coffee futures contract is the world benchmark for Arabica coffee prices. Market C is a global commodity exchange where contract prices for physical green beans are traded from one of 20 nationally licensed warehouses to one of several ports in the US and Europe, with premiums and discounts stated for port and growth.
The cocoa contract is the world benchmark for the global cocoa market. The contract sets the price of physical delivery of exchange products from orin network of Africa, Asia, Central and South America to any of five US delivery ports.
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Wheat futures contracts are offered on the Chicago Board of Trade (CBOT) and serve as the industry standard for wheat prices. CBOT wheat futures prices are quoted in dollars and cents per bushel and trade in lot sizes of 5000 bushels (136 tons).
Corn futures are exchange traded contracts on the CBOT, where the price of corn is bought and sold at 5000 bushels per contract. This contract is considered the world benchmark for corn, which is commonly used for livestock and poultry feed.
Cotton futures contracts are primarily traded on the New York Mercantile Exchange (NYMEX), where you will find the benchmark for cotton prices globally. The contract price is 50,000 pounds net weight, agreed by the buyer to take delivery from the seller on a specified date in the future.
Crude palm oil futures contracts are traded on Bursa Malaysia. The contract size is 25 tonnes and is used as the worldwide benchmark price for crude palm oil trading. The two largest producers and exporters of palm oil are Indonesia and Malaysia.
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Soybean meal contracts are traded on the CBOT, and each futures contract is for 100 short tons, or about 91 tons. The commodity is traded between traders, importers, farmers tending to animal husbandry and food processors.
The White Sugar futures contract is used as a global benchmark for the pricing of physical white sugar. The soft commodity is listed as White Sugar no 5 and is traded on the ICE Futures Europe exchange in London.
Futures for Robusta Coffee are traded on ICE and the contract size is 10 tonnes. The largest producers of coffee are in Africa, Asia and South America.
The London Cocoa futures act as a global benchmark for the physical price of cocoa. The cocoa is traded on ICE, and each contract is settled for 10 tons.
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Soybean futures contracts are traded on the CBOT. The standard contract size is 5,000 bushels, while the mini soybean contract is worth 1,000 bushels.
Soybean oil is traded on the CBOT, where each futures contract size settles at 60,000 pounds (or 27 tons). Soybean oil is commonly used to make cooking oil and margarine.
Lumber futures are traded on the Chicago Mercantile Exchange (CME), where each contract size is settled at 110,000 board feet or about 260 cubic meters.
Frozen concentrated orange juice (FCOJ) is used as a benchmark for orange juice prices. A futures contract is settled for 15,000 pounds of concentrated orange juice.
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Lean Hog futures are traded on the CME. The contract size is set at 40,000 pounds (or 18 metric tons) of lean pork
Live cattle futures contracts are traded on the CME. The contract size is 40,000 pounds (or 18 tons) of live cattle.
Oat futures are exchange traded contracts where the buyer agrees to receive delivery from the seller of a specified quantity of oats (eg 5000 bushels or 86 tons) at a predetermined price on a future delivery date. Futures contracts are traded on the CBOT, where the benchmark for oat prices is determined.
The Coarse Rice futures contract is traded on the CME, where contracts are made for the size of 2000 hundredwehts, or about 91 tons of coarse rice.
Commodities Trading In Uk
The UK food wheat futures contract is recognized as the European benchmark for physical food wheat prices. It is actively traded on the ICE Futures Europe exchange in London by traders, exporters and many others.
Hard commodities are products that are mined, such as crude oil, gold and copper. The main characteristic of hard commodities is that they are found below the earth’s surface in certain geological areas. Examples include:
Soft commodities are traded on several well-known exchanges, such as ICE, CBOT and the Kansas Board of Trade (KCBT). However, you don’t need to trade soft commodities directly on an official exchange – you can trade over the counter (OTC) with us. This means you can trade commodities listed on several exchanges in one place.
When you trade OTC, you’ll use a broker, like us, to execute your trades – which often means more options, but it also has unique risks.
Investing In Oil
With us, you can choose to trade commodities on the spot, in our undated markets or through options and futures. Trading on the spot means that your trade will be executed instantly at the current market price. Options and futures allow you to trade soft commodities at a specific date and price in the future.
There are several reasons why people choose to trade the soft commodity market. First, it is important to understand that this particular sector is highly volatile, as agricultural production is notoriously unpredictable. Traders who prefer riskier markets often choose soft commodities because their price volatility can provide more trading opportunities.
However, their volatile nature also means that soft commodities carry hh risk. Unfavorable weather events – such as heavy rain or drought – can wreak havoc on soft commodities and cause drastic price changes in a short period of time. Furthermore, changes in import and export volumes can also directly affect weak commodity prices.
A more recent example of the volatile nature of soft commodities can be seen in the effects of the war between Ukraine and Russia. Corn prices are rising rapidly, partly due to the fact that Ukraine’s corn crop is 54% smaller than in 2021, which limits supply.
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Trading soft commodities on leverage only increases risk. You should always take appropriate risk management measures when opening positions using derivatives.
You can open a CFD trading account to speculate on spot (undated), futures and options prices on a range of soft commodities. You can also trade stock prices and ETFs using derivatives instead of owning actual shares.
You will be trading CFDs using leverage, which means you will need to make a deposit to open a position. Leverage increases profits and losses because it is based on the size of the full position, not the deposit. Always manage your risk carefully.
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Agricultural Commodity Trading
The risk of loss by investing in CFDs can be significant and the value of your investment can fluctuate. CFDs
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