Commodities and futures are sometimes viewed synonymously. One reason is that the early futures contracts were based on tangible assets such as grains, metals, and livestock. Since then the futures have extended into energy and financial areas.
Therefore, commodities can be defined as tangible (gold, oil, corn) or intangible (bonds, stock indices, other financials).
Commodities trade in the:
It should be recognized commodities may be traded in many of these markets. Gold, silver and oil are three examples of multiple trading avenues. However, there is an interaction among these markets which erases wide pricing differentials or spreads for economic trading units.
This interaction creates and limits potential arbitrage situations. It also broadens the hedging horizon.
There is a growing acceptance about the inclusion of commodities in portfolio or asset allocations. Quantitative analysts have noted that there is a counterbalancing effect between tangibles and intangibles.
We have substantial trading and risk management experience in the commodities and futures markets. In fact, we literally wrote the Risk Management Manual for a major commodity exchange.
For more information, this online site contains other references for commodities. The following list highlights some of these references.
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