Definitions
- What is “Commodity CFDs”?
- Commodity CFDs are traded online
- Invest in Commodity Market with transparency
- How Commodity CFDs trading work?
- Example of Selling Spot Gold
What is “Commodity CFDs”?
“Commodity” is an article of commerce or a product that can be used for commerce.
In a narrow sense, products traded on an authorized commodity exchange.
Types of commodities include agricultural products, metals, petroleum, foreign currencies, financial instruments and indexes, to name a few.
Commodity CFDs are traded online
Commodities markets are the original markets where raw or primary products are exchanged.
Commodities are amongst the world’s most popular products traded on futures exchanges and are also available as CFDs.
Retail traders now have the ability to trade such products without having to receive physical delivery but instead trade them purely for financial purposes.
With such large popularity in global precious metals, agriculture and crude oil, online Forex and CFD brokers offer all its clients access to this array of products.
List of Online Forex and CFD brokers
Invest in Commodity Market with transparency
Very similar to the Index products, online Forex and CFD brokers give their Traders access to the world’s largest futures markets to ensure their commodity CFDs are completely transparent.
Gain access to crude oil, precious metals and agriculture with real-time depth and the tightest spreads available.
Commodity markets are open nearly 24 hours a day, usually with two small breaks and then closed for the weekend.
How Commodity CFDs trading work?
Online Forex and CFD brokers offer commodities, precious metals, crude oil and agriculture products on the globe’s largest futures markets.
All commodity CFDs are financially settled, there are no deliverables.
This means no trader can physically take or give the commodity they trade but instead settle the contract like a traditional CFD with the difference between the opening and closing prices.
Like all CFD products if a trader believed the price of crude oil was going up they would buy one/multiple crude oil contracts only outlaying a small margin.
Each contract consists of 500 barrels of crude oil and therefore each dollar the price of oil goes up, $500 per contract will be gained and each dollar it drops $500 per contract will be lost.
Like all index products, commodity CFDs are short sellable for traders’ ability to profit from falling markets as well.
Example of Selling Spot Gold
You decide that the price of gold is going to fall over the next week or so based on your research.
One way to get exposure is to use the CFD over the Emini Gold Futures contract.
Each mini contract is for 33 ounces.
In order to profit from a fall in price you short 2 CFDs.
Therefore for each $1 movement in the price of the contract moves your profit will rise or fall by $33 per contract.
The current quote for GOLD is 1600.2 – 1600.5. You wish to sell two contracts at the offered bid of 1600.2.
Opening Position – (33 x 1600.2) x2 = -$105,613.20
The next week gold has fallen and the current quote is 1575.0 – 1575.20. The trader decides to buy 2 contracts at the asking price of 1575.2 to close out the short position.
Closing Position – (33 x 1575.2) x2 = -$103,963.20
Profit/Loss = $1,650
Make note that the standard commission on this would have been $20 to open the position and $20 to close the position.
There are no financing implications associated with FP Markets’ commodity products.
Therefore net profits would have been $1,610.