UK Accounting Glossary
Commodity futures are futures contracts for the delivery of commodities. The oldest commodity futures market is the Chicago Board of Trade (CBOT), which began trading the first futures contract, a standardized forward agreement, in 1865. All the earliest commodity futures were for agricultural products. Today, commodities futures contracts also exist for natural resources such as petroleum products and precious metals. Like all futures markets, trade in commodity futures is known to be a zero-sum game, meaning that one party to a trade makes as much as the other loses. Because commodity futures markets have many participants who have spent years becoming an expert in one commodity, beginning to trade in commodity futures is extremely risky for the amateur investor. The beginner’s commodity futures losses are likely to be the veteran’s commodity futures gains!
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This glossary post was last updated: 4th February 2020.