Commodity Index

AAA

DEFINITION of 'Commodity Index'

An index that tracks a basket of commodities to measure their performance. These indexes are often traded on exchanges, allowing investors to gain easier access to commodities without having to enter the futures market. The value of these indexes fluctuates based on their underlying commodities, and this value can be traded on an exchange in much the same way as stock index futures.

INVESTOPEDIA EXPLAINS 'Commodity Index'

There is a wide range of indexes on the market, each of them varying by their components. The Reuters/Jefferies CRB Index, which is traded on the NYBOT, comprises 19 different types of commodities ranging from aluminum to wheat. They also vary in the way they are weighted; some indexes, for instance, are equally weighted and others have a predetermined, fixed weighting scheme.

RELATED TERMS
  1. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  2. Chicago Board Of Trade - CBOT

    A commodity exchange established in 1848 that today trades in ...
  3. New York Board Of Trade - NYBOT

    A commodities exchange in New York that trades futures and options ...
  4. Futures

    A financial contract obligating the buyer to purchase an asset ...
  5. Goldman Sachs Commodity Index - ...

    A composite index of commodity sector returns which represents ...
  6. Commodity Futures Trading Commission ...

    An independent U.S. federal agency established by the Commodity ...
RELATED FAQS
  1. Do hedge funds and mutual funds invest in commodities in high inflation environments?

    Hedge funds and mutual funds are very different types of investment vehicles.The contents of a hedge fund are determined ... Read Full Answer >>
  2. What are some examples of smart beta ETFs that use passive and active management?

    There are a number of smart beta exchange-traded funds (ETFs) that use passive and active management, including the WisdomTree ... Read Full Answer >>
  3. How does implied volatility impact the pricing of options?

    Implied volatility is an important aspect of the time value premium of an option. As implied volatility increases, call and ... Read Full Answer >>
  4. Which federal regulatory agencies approved and are now responsible for enforcing ...

    Five federal regulatory agencies approved and are jointly responsible for enforcing the Volcker rule. These agencies include ... Read Full Answer >>
  5. How are commodity spot prices different than futures prices?

    Commodity spot prices and futures prices are different quotes for different types of contracts. The spot price is the current ... Read Full Answer >>
  6. Does the Volcker Rule prevent commercial banks from offering shares of hedge funds ...

    The Volcker Rule does not prevent commercial banks from offering trading services in hedge or private equity funds to their ... Read Full Answer >>
Related Articles
  1. Options & Futures

    An Overview Of Commodities Trading

    Commodities markets, both historically and in modern times, have had tremendous economic impact on nations and people. Investing in commodities can quickly degenerate into gambling or speculation ...
  2. Active Trading

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  3. Mutual Funds & ETFs

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  4. Options & Futures

    Volatility Index Uncovers Market Bottoms

    VIX can gauge when the market has hit bottom - a welcome sign of better things to come.
  5. Credit & Loans

    What is a Syndicated Loan?

    A syndicated loan is one that involves a group of lenders (called the syndicate) who pool their lending resources to make a loan.
  6. Investing Basics

    What Does Spot Price Mean?

    Spot price is the current price at which a security may be bought or sold.
  7. Investing Basics

    What Does a Clearing House Do?

    A clearing house is a third-party agency or separate entity that acts as a go-between for buyers and sellers in financial markets.
  8. Investing Basics

    What is an Asset-Backed Security?

    An asset-backed security (ABS) is a debt security collateralized by a pool of assets.
  9. Taxes

    What is an Ad Valorem Tax?

    An ad valorem tax is a levy placed on real or personal property based on the assessed value of that property.
  10. Investing Basics

    What is Meant by Implied Volatility?

    The estimated volatility of a security's price.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
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!