Commercial Trader

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DEFINITION of 'Commercial Trader'

A classification used by the Commodity Futures Trading Commission (CFTC) to describe traders that use the futures market primarily to hedge their business activities.

INVESTOPEDIA EXPLAINS 'Commercial Trader'

This type of classification is usually given to futures commission merchants, foreign brokers, clearing members or even investment banks that buy index futures to hedge current long positions. An increase in commercial traders' long positions in a certain commodity may mean these traders believe the price of the commodity will increase, in which case they would not want to be adversely affected by missing out on a price increase.

RELATED TERMS
  1. Commodity Futures Trading Commission ...

    An independent U.S. federal agency established by the Commodity ...
  2. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  3. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  4. Futures

    A financial contract obligating the buyer to purchase an asset ...
  5. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  6. Open Interest

    1. The total number of options and/or futures contracts that ...
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