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commodity market,organized traders' exchange in which standardized, graded products are bought and sold. Worldwide, there are 48 major commodity exchanges that trade over 96 commodities, ranging from wheat and cotton to silver and oil. Most trading is done in futures contracts, that is, agreements to deliver goods at a set time in the future for a price established at the time of the agreement. Futures trading allows both hedginghedging,
in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market.
..... Click the link for more information. to protect against serious losses in a declining market and speculationspeculation,
practice of engaging in business in order to make quick profits from fluctuations in prices, as opposed to the practice of investing in a productive enterprise in order to share in its earnings.
..... Click the link for more information. for gain in a rising market. For example, a seller may sign a contract agreeing to deliver grain in two months at a set price. If the grain market declines at the end of two months, the seller will still get the higher price quoted in the futures contract. If the market rises, however, speculators buying grain stand to profit by paying the lower contract price for the grain and reselling it at the higher market price. Spot contracts, a less widely used form of trading, call for immediate delivery of a specified commodity and are often used to obtain the goods necessary to fulfill a futures contract. An independent U.S. regulatory agency, the Commodity Futures Trading Commission was established in 1974 to regulate commodity markets. In 1982, the Chicago Mercantile Exchange introduced a futures contract for Standard & Poor's 500 U.S. companies that allows investors to speculate on the future prices of those stocks. Trading of S&P 500 and other financial futures has broken down some of the barriers that once separated stockstock,
in finance, instrument certifying to shares in the ownership of a corporation. Bonds are similar evidences of shares in a loan to a corporation. Stock yields no dividends until claims of bondholders have been met.
..... Click the link for more information. , bondbond,
in finance, usually a formal certificate of indebtedness issued in writing by governments or business corporations in return for loans. It bears interest and promises to pay a certain sum of money to the holder after a definite period, usually 10 to 20 years.
..... Click the link for more information. , and commodity markets and made it easier for investors to hedge their stock investments. Critics charge that the futures trading at the commodity markets in Chicago has made stock prices more volatile. The Chicago Board of Trade is the largest futures and options exchange in the United States, the largest in the world is Eurex, an electronic European exchange.