Futures and commodities speculators can take advantage of highly leveraged exposures in both financial and nonfinancial markets (commodities such as energies, grains, meats and metals). That means they can buy futures contracts by depositing just a small percentage of the overall contract price. Their goal is to profit from changes in the price of the futures contract.
Hedgers, those who hold a specific commodity (asset) or have a specific exposure (such as energy cost), often take a position opposite of the cash market to help reduce risks.
Investing in Futures and Commodities
Futures and commodities investments offer investors with more complex investing needs a way to potentially profit from both the upward and downward movement of commodity and financial markets.
Because the futures and commodities markets can be highly unpredictable — often swinging dramatically — futures and commodities investments are not suitable for all investors. Before starting, consider your:
- Financial experience
- Investment goals
- Risk tolerance
- Financial resources
Try to get well versed with commodity market working and its quantum of volatility with comparing historical data. Understand International commodity price change’s impact on Indian commodity market. Trade with keeping your risk appetite and another factors in mind.