The demand and supply of a particular commodity determine the price. However, it is difficult to predict these fluctuations. For example, the price of neon gas shot up recently, after Russia and Ukraine entered into conflict. Commodities include energy such as natural gas and crude oil, base metals like copper and zinc, and agricultural products, such as wheat and pulses.
Commodities are traded in several ways, including in the commodity derivatives market. There are two basic categories of participants in this market: risk givers and risk takers. The former includes those who have a physical exposure to the commodity, while the latter group seeks to pass along the risk.
The types of commodities traded in this market involve contracts for futures, options, and forwards. These contracts give the buyer ownership of a specific underlying asset at a future date. These commodities are traded on exchanges. Some of the largest global commodity exchanges are the Tokyo Commodity Exchange and the London Metal Exchange.
Traders who engage in commodity market trading typically include commercial entities engaged in production or trading in a commodity. They also include specialized intermediaries that understand the market.
