XS
SM
MD
LG
XL dev

MARCH 25: Earnings Report —DO NOT PUBLISH—

Our chief market strategist breaks down the day's top business stories and offers insight on how they might impact your trading and investing.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/commodities-trading-market
5 min read
Photo by Getty Images

Key Takeaways

  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.
  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.
  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.
  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.

Though NKE matched analysts’ revenue expectations and beat third-party consensus on earnings per share, the stock fell nearly 4% in post-market trading. The news media immediately focused on what some analysts called disappointing North American sales growth. Sales in the region did climb 7%, but just missed the Street’s estimates.

There were high expectations going into NKE earnings, especially after Foot Locker Inc. (FL) crushed Wall Street estimates for Q3, citing in part success with Nike products. One thing to keep in mind as NKE trades today is the other side of the world, namely China, where NKE saw its fastest quarterly growth of any region. Consider thinking about how those results might fit into the China picture, where we’ve seen some U.S. companies run into trouble recently while others continue to perform well. 

Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image. But in a sense, all investors—whether big, small, or in between—participate in the commodity markets. If today, for example, you ate breakfast, made a cup of coffee, adjusted your thermostat, or filled your gas tank, guess what? You’re already a commodities “player.”

Commodities affect our lives every day, in other words. So, just what is a “commodity,” and how does commodities trading work? How do I “invest” in commodities? The following offers a brief introduction to commodities and a few pointers for investors.

Basics of Commodities and Types of Commodities

Simply defined, commodities are raw or unprocessed materials that can be bought or sold and are used to make something else that eventually is consumed. For trading purposes, a given commodity typically is interchangeable—one bushel of corn is considered pretty much the same as any other. Many commodities are pulled from deep underground or plucked from right on top of the ground.

Of these commodities, crude oil is the world’s most actively traded. On average, over 4.2 million futures and options contracts traded each day in 2017, according to Futures Industry Association data.

Who Trades Commodities?

There are two broad types of commodity market participants:

  • Hedgers (aka “commercials”). These are businesses that are actually producing, shipping, processing, or otherwise handling the commodities in question. They include oil and gas producers and refiners, miners, grain millers, farmers, and meatpackers.
  • Speculators. These include banks, hedge funds, and individuals who trade commodities. They speculate that the price of a commodity will go up or down within a certain time frame, and they place trades with the aim of turning a profit.

What about Futures Contracts and Futures Exchanges?

Both play a major part in the commodities markets. are standardized agreements between buyers and sellers where both parties agree to buy or sell a specific amount of a particular commodity at a predetermined price, at a specific date in the future. For example, one crude oil futures contract specifies 1,000 barrels of West Texas Intermediate crude, the U.S. benchmark.

Print

Key Takeaways

  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.
  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.
  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.
  • Commodity markets may conjure a freewheeling world of high rollers living hard and taking outsized risks, and there’s some historical truth in that image.

Related Videos

Call Us
800-454-9272

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

Carefully consider the investment objectives, risks, charges and expenses before investing. A prospectus, obtained by calling 800-669-3900, contains this and other important information about an investment company. Read carefully before investing.

*Futures trading is speculative, and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products. Futures trading services provided by TD Ameritrade Futures & Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.

Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC).

Futures and futures options trading services provided by TD Ameritrade Futures & Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.

ETFs can entail risks similar to direct stock ownership, including market, sector, or industry risks. Some ETFs may involve international risk, currency risk, commodity risk, and interest rate risk. Trading prices may not reflect the net asset value of the underlying securities. Commission fees typically apply.

Investments in commodities are not suitable for all investors as they can be extremely volatile and can be significantly affected by world events, import controls, worldwide competition, government regulations, and economic conditions.

Asset allocation and diversification do not eliminate the risk of experiencing investment losses.

adChoicesAdChoices

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC, and a subsidiary of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of the Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 Charles Schwab & Co., Inc. Member SIPC.

Scroll to Top