Commodities Trading

commodities group

The Stern Options Binary Options Asset Index is made up of 4 categories – currencies, stocks, commodities, and indices.   Each of these categories is made up of assets that can be bought and sold on any one of the global financial markets.   Commodities trading with the binary options trading instrument is just one of four reasons why you should use the Stern Options online trading platform.

Before we get into what commodities are and how to use them as a binary options trading vehicle, let’s quickly review what binary options are.

What are binary options?

As stated many times before, binary options are the simplest trading instrument available to take advantage of the global financial markets. You also do not buy and sell the asset directly, you trade on the price movement of the underlying asset within a specified timeframe.

As understood by its name, there will only ever be one of two possible outcomes – right or wrong.   After studying the price movement of an asset, you then decide whether the price will move up or down within a certain timeframe.   The Stern Options trading platform allows you to choose between different timeframes.  You then place an amount of money from your capital on the binary options timeframe of your choice.

If you predict or call that the price will move upwards within the stated timeframe, then you are “in the money.”   On the other hand, if you call that the price will move upwards and it moves down, then you called the trade incorrectly, and you are “out of the money.”

What are commodities?

Commodities are basic goods that are traditionally exchanged (bought and sold) with commodities of the same type.   Examples of commonly traded commodities are gold, oil, beef, iron ore, sugar, coffee beans, wheat, silver, and platinum.

The reason why commodities are considered basic goods is that they have been extracted from their natural state (as in gold, platinum, silver, or iron ore), or they have been grown (sugar, tea, coffee beans, and wheat) and are brought to the marketplace in their natural state.  In layman’s terms, they are raw materials which are used to manufacture goods and consumables.

The most common Commodities Trading assets have well-established markets with traders utilizing futures contracts to buy and sell these commodities.  It is interesting to note that global stock exchanges have standardized the quantity and minimum quality of the respective commodities.   This means that if you buy gold and sell gold for example, you will always buy per standard measure (ounce, kilogram) and you will only be able to buy a minimum number of these units.

Commodities Trading

Stern Options offers wheat, sugar, silver, platinum, gold, coffee, and crude oil as Commodities Trading options to their clients.   In the case of commodities, the underlying asset consists of a futures contract.   The price of each commodity is set by the supply and demand functions of the stated commodity.   The price increases when there is very little supply and a large demand, and it decreases when there is a glut of the commodity on the market and very little demand.

It is important to note, that when trading in commodities, there are two types of investors:

  • Hedge-fund traders
    When the volatility of the global financial markets increases, investors move their investments from liquid stocks to these commodity stocks and utilize them as hedge fund stock. Their aim is not to turn a profit; however, to rather protect their investments.
  • Speculating traders
    Traders who speculate on commodity stocks are not interested in owning these assets. They rather trade on the price movement of the underlying asset, resulting in large variations of the price of the commodities.  The one advantage of major price swings in an asset is that it increases the amount of cash, or liquidity, in the stock markets.

Final Thoughts on Commodities Trading

Now that we understand what commodities are and how Commodities Trading on the global financial markets works, it’s fairly easy to understand how they can be utilized as part of the binary options trading instrument.  When we trade on the price movement of an individual commodity, we are actually trading on the price of the related futures contract.   In order to place successful trades, we need to study the price movements of the linked futures contract as well as the price of the underlying commodity itself.  This process is easy to achieve with Stern Options trading platform because its information resources are online for the trader to draw upon.  As well as this, Stern’ customer support team are available to you by phone, chat and email every day.