If you're an investor, the commodity futures suggest the following benefits:
High leverage: - You can get a position in a picky commodity by paying simply a fraction of that importance as a margin. Moreover, the whole margins in the CFM (Commodity Futures Market) are lower than the equity futures & options.
Less Manipulation: - Governed by the international rate movements, commodity trading markets are fewer prone to rigging or rate manipulation.
Diversification: - Commodity rates are prone to demand & supply dynamics, climate conditions, natural disasters and Geo-political tensions. Accordingly, the commodities are an independent benefit class, and can show to be an effectual means of diversification in one is investment portfolio.
If you are an exporter or importer, you advantage in the following traditions:
Hedge against rate fluctuations: - In today’s extremely volatile circumstances, wide fluctuations in rates of import & export products can straight affect your bottom line.
Commodity futures assist's you to acquire or sell commodities at a rate decided months previous to the real transaction, thereby ironing out any rate changes that happen consequently.
Lock-in price for your produce: - If you're a farmer, there is a opportunity that the rate of your produce may appear down drastically at the time of crop. By taking trading positions in the commodity futures, you can efficiently lock-in the rate at which you wish to trade your produce at harvest (return) time.
Assured demand: - Any type of glut in the physical trading market could denote an endless stay for a buyer. The selling commodity future agreements can provide you assured demand at the time of harvest.
If you are a big consumer of a commodity product, here is how this commodity market can help you:
Control your costs: - If you are a big industrialist, the mainly raw material price dictates the final rate of your production. Any unexpected rise in the material price can compel you to exceed on the rumble to your clients, making your all products unattractive in the commodity market. On the other side, if you are not capable to pass on the prices, your margins & profitability will be struck Through the commodity futures, you can lock in the rate of your all raw materials.
Ensure continuous supply: - Any type of shortage in the supply of good's or raw materials can booth your production and create you default on your auction obligations. You can pass up this risk by purchasing a commodity future agreement by which you are guaranteed of supply of a permanent quantity of good's at a pre-decided rate at the appointed time.
This is Rahul, Senior Analyst/ Research at Trifid Research Pvt. Ltd. We can provides you all type of Free Commodity Tips, MCX Tips with Live LME Data, News Information, and all update about commodity market.