What are the Types of Commodity Futures?
There are six types of commodity futures. The five types include livestock futures, metals futures, energy futures, energy futures, grain futures, and softs futures.
Livestock Futures
Livestock futures are also known as cattle or Hog Futures. The prospects primarily deal with the meat that you eat. Livestock futures involve the trading of cattle or the different types of meat that you consume. In the United States, livestock futures represent an essential commodity in the market. Individuals trade using futures to hedge against risk, especially when they anticipate a price drop or drought.
Metals Futures
The metal commodity refers to the different precious metals that exist. Many people love trading in gold, platinum, silver, etc.; however, the market is extremely volatile. You can invest in a precious metal expecting a considerable profit, but you end up making a loss. The volatility significantly affects companies that rely on precious metals as raw materials, for example, the jewelers’ industry and computer producers. The different producers opt to trade with futures contracts to ensure that they are well protected against the price fluctuations.
Energy Futures
Energy futures represent one of the most lucrative investments that many investors like. The energy sector represents one of the most significant industries that exist in the world. However, the industry relies on futures contracts since it is a liquid and vibrant sector. Consequently, many investors rely on futures contracts for price speculation and risk hedging. Leading investors include speculators that depend on the energy industry and individuals that produce the energy.
Grains Futures
Grains futures refer to the grains that you consume at a supermarket or trading store. The most commonly traded grains are wheat and corn. Many consumers rely on the items for consumption and the production of oil. Individuals trade on grain futures for price speculation and hedging against volatile times. The futures help in the prediction of prices of the commodities in the stores.
Softs Futures
Softs commodities refer to products used in the manufacture and product of soft drinks. Such items include cocoa, oranges, pineapples, tea, and other natural products. The fruits and beverage products are affected by numerous factors such as natural disasters, consumer preferences, and energy. Investors transact with futures contracts to provide risk hedging and speculate for prices.
Overall, the six types of commodities futures involve trading in products that consumers use daily. Investors prefer to use a futures contract to trade the items because of their volatility and the risk of dealing with the commodities.
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