Commodity Trader


DEFINITION of 'Commodity Trader'

Unlike stock traders, who buy and sell equities, commodity traders focus on investing in commodities. These traders either takes positions based on forecasted economic trends or arbitrage opportunities in the commodity markets. Oil and gold are two of the most common traded commodities, but markets exist for cotton, wheat, sugar, cattle, pork bellies, lumber, silver and other precious metals.

BREAKING DOWN 'Commodity Trader'

Commodity traders usually do not have a need for the specific asset they are trading, but gain exposure through forward and future contracts. Contracts are usually hedged and actual delivery is a seldom occurrence.

  1. Forward Contract

    A customized contract between two parties to buy or sell an asset ...
  2. Dalian Commodities Exchange

    A commodities exchange located in Dalian, China. The Dalian Commodities ...
  3. Commodity Market

    A physical or virtual marketplace for buying, selling and trading ...
  4. Commodity-Backed Bond

    A commodity-backed bond is a type of debt security which is linked ...
  5. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  6. Delta Hedging

    An options strategy that aims to reduce (hedge) the risk associated ...
Related Articles
  1. Options & Futures

    Losing To Win

    Adopting realistic expectations is essential to staying in the trading game.
  2. Fundamental Analysis

    A Silver Primer

    Find out what affects the price of silver, the types of investments that can be made and the methods in which it is traded.
  3. Forex Education

    Using Double Tops And Double Bottoms In Currency Trading

    Find out how to apply the two most common price reversal patterns to your trading.
  4. Trading Strategies

    Introduction to Types of Trading: Fundamental Traders

    Learn about the different traders and explore in detail the broader approach that focuses on company-specific events.
  5. Options & Futures

    Trading The QQQQ With In-The-Money Put Spreads

    Even beginners may use this strategy to trade a bullish outlook.
  6. Forex Education

    Introduction to Types of Trading: Technical Traders

    Learn about the different traders and explore in detail the broader approach that looks to the past to predict the future.
  7. Options & Futures

    Can Insiders Help You Make Better Trades?

    Find out why the trading activity of owners and executives can be a valuable trade-confirmation tool.
  8. Investing Basics

    3 Alternative Investments the Ultra-Rich Usually Own

    Learn about the ultra rich and what normally comprises their net worth; understand the top three alternative investments usually owned by the ultra rich.
  9. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  10. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  6. What are the top high yield bond ETFs?

    Three of the most popular high-yield bond exchange-traded funds, or ETFs, are the Peritus High Yield ETF (HYLD), the SPDR ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!