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.

BREAKING DOWN '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. Noncommercial Trader

    A classification used by the Commodity Futures Trading Commission ...
  2. Double Hedging

    Hedging a position by using futures and options, thereby doubling ...
  3. Small Trader

    An options or futures trader holding or controlling positions ...
  4. Commodity Futures Trading Commission ...

    An independent U.S. federal agency established by the Commodity ...
  5. Short The Basis

    A futures strategy involving the purchase of a futures position ...
  6. Selling Hedge

    A hedging strategy with which the sale of futures contracts are ...
Related Articles
  1. Investing

    How To Invest In Commodities

    Find out which futures, options or funds will be your perfect commodity portfolio fit.
  2. Trading

    Trading Psychology: Consensus Indicators - Part 2

    Professional market players are some of the best models for the individual small trader to mimic.
  3. Trading

    Advantages Of Trading Futures Over Stocks (APPL)

    We look at the top eight advantages of trading futures over stocks.
  4. Managing Wealth

    Commodities Relative Value

    In this special report, we take a close look at the hedge fund segment, considering key characteristics and performance trends, and offering our outlook for the rest of the year and beyond.
  5. Investing

    Forecast The FX Market With The COT Report

    Three empirical findings on futures data can help currency traders determine buy and sell points.
  6. Investing

    Hedging With ETFs: A Cost-Effective Alternative

    The benefits of ETFs for hedging are clear and investors of all sizes are taking notice.
  7. Financial Advisor

    When Will it Be Safe to Buy Commodities?

    When will it be safe to buy commodities (and which ones)? A closer look at the commodities markets and how they move.
  8. Investing

    The Role Of Speculators In The Commodity Market

    Contrary to popular belief, speculators are important for the market. Find out exactly what they do.
  9. Investing

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  10. Investing

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
RELATED FAQS
  1. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures Read Answer >>
  2. Do hedge funds invest in commodities?

    Learn about hedge funds that invest in commodities. Read about Commodity Trading Advisors who focus specifically on trading ... Read Answer >>
  3. Who sets the price of commodities?

    Commodities are extremely important as they are essential factors in the production of other goods. A wide of array of commodities ... Read Answer >>
  4. How can I trade in foreign futures?

    Discover how an American investor can get started in trading foreign futures, including which regulations and restrictions ... Read Answer >>
  5. How have futures performed historically?

    See how futures products have historically performed and why they tend to perform best at specific times during a normal ... Read Answer >>
  6. How are commodity spot prices different than futures prices?

    Find out more about commodity spot and futures prices, how to calculate a commodity's futures price, and the differences ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center