What is meant by Commodities?

The term Commodities mainly refers to a market that trades in the chief economic sector relatively than mass-produced products. Soft commodities comprise of agricultural products such as cocoa, wheat, sugar, coffee, and cocoa. Hard commodities are mined which comprise of gold and oil. Investors contact about 50 major commodity markets worldwide with financial transactions gradually outnumbering physical trades in which goods are supplied. The oldest way of investing in commodities is Futures Contracts. Futures are safeguarded by physical possessions. Commodity markets can consist of physical trading and end product trading by making use of spot targets, futures, options and forwards on futures. Farmers have used a simple form of unoriginal trading in the commodity market for eras for price risk management. A financial derivative refers to a financial instrument whose value is resulting from a commodity named as underlier. Derivatives are either exchange-traded or over-the-counter OTC. An aggregate number of derivatives are traded through clearing houses some with Central Counterparty Clearing, which deliver clearing and settlement services on a futures exchange, along with off-exchange in the OTC market. Derivatives or products such as futures contracts, Swaps1970s-, Exchange-traded Commodities or ETC 2003-, forward contracts have become the chief trading tools in commodity markets. Futures are traded on controlled commodities exchanges. Over-the-counter or OTC contracts are confidentiallydiscussed bilateral contracts entered into amongst the contracting parties openly.