Commodity trading may be considered as the lesser-known cousin of stock trading. Instead of equity, it gives investors access to 100+ commodities like sugar, cotton, silver, etc.
In this blog, we will look at some of the most important questions surrounding commodity trading in India. Along the way, we will try to figure out how commodity trading compares to stock trading.
Important: This blog is meant to educate readers and the information furnished here is not to be construed as investment advice from Cube Wealth.
Where To Invest In Commodities?
Investors trade commodities like crude oil, natural gas, silver, cotton, etc. in the commodity market The commodity market can be a physical or virtual marketplace.
If it’s a physical marketplace, investors will usually own the commodity and trade it for cash or cash equivalent commodities. A virtual commodity market, however, generally includes commodity exchanges.
Most virtual commodity investors have no interest in physically owning the commodity. The main interest lies in profiting from the price differentials that may arise due to supply and demand or other factors.
Investors enter into futures contracts to trade commodities. A futures contract is a legal agreement between a buyer and a seller that carries a fixed price and a fixed date of sale/purchase of the commodity.
Futures contracts adhere to the Forward Contracts (Regulation) Act, 1952. But commodities aren’t the only assets that are traded using futures contracts.
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Shriram is a Content Marketer at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. Shriram’s love for philosophy, product development, and empowering people through quality content is what got him to Cube Wealth.
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