By Scott Frush
Confused approximately commodities? seek advice this crucial source
Oil, rice, corn, the Euro--commodities nowadays are sizzling, and they are getting warmer. This attractive and thorough consultant covers all of the fundamentals you have to to benefit from modern day so much energetic funding classes.
Commodities Demystified takes you immediately to the guts of the topic, starting with a dialogue at the simple parts of the commodities marketplace. It then introduces you to some of the on hand commodities and funding suggestions, together with exchange-traded tools, futures, and concepts, and explains the correlation among inflation and commodity costs. ultimately, each one bankruptcy ends with a quick-review quiz allowing you to check your knowledge.
Designed to supply a radical schooling with no overwhelming you with complexities and mystifying jargon, this self-teaching advisor is precisely what you must effectively establish and exchange commodities in contemporary market.
This confusion-busting advisor covers:
- the basics of the commodities industry
- various commodity sessions and subclasses
- discovering a credible commodities dealer
- the way to make on-line trades
- ideas for minimizing probability and maximizing gains
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Extra resources for Commodities Demystified
28 All about the Risks Figure 3-1. Commodity Risks 1 Market Risk 2 Volatility Risk 3 Geopolitical Risk 4 Environmental Risk 5 Regulatory Risk 6 Weather and Force Majeure Risk 7 Terrorism Risk 8 Liquidity Risk 9 Speculative Trading Risk 1 0 Overexposure Risk 1 1 Knowledge and Expertise Risk Said another way, since commodities offer above average return potential, that also means above average risk. MARKET RISK Market risk refers to external factors that can cause declining values in commodities investments.
True b. False 3. Why do commodities provide a hedge against inﬂation? a. Inﬂation causes consumer demand for raw materials to skyrocket. b. Inﬂation is controlled with robust commodity demand. c. Commodity prices and inﬂation typically move together. d. Commodity prices are not correlated with inﬂation. 4. Which of the following is a reason to invest in commodities? a. Requires more time and effort than other investments b. Maximum external and management issues c. Zero risk of product obsolescence d.
Producers often want to protect against price risk, or the risk that the commodities they want to sell in the future will decline in price. To accomplish this goal, many producers hedge their risk exposure by selling futures contracts, which involves selling a commodity now for delivery at some point in the future. Producers therefore are considered hedgers as they want to lock in prices for their goods without taking on the risk of prices falling, which will cause them to earn less for their efforts.