Spread Betting – Why Choose Commodities?
Gold is making itself comfortable around the $1000 mark, the price of oil continues to rise slowly and steadily out of its recession-induced coma, and wheat is embroiled in a food v fuel debate in developing countries. This sort of heightened activity makes commodities spread betting a potentially lucrative pursuit.
Commodities are typically volatile markets, and are subject to dramatic changes in price as supply and demand fluctuate. But while this price volatility makes commodities spread betting a potentially profitable proposition, it can just as easily lead to large losses if markets move quickly against you. Also, spread betting on commodities makes it possible to take smaller positions than are possible with underlying futures contracts, giving you access to exciting markets at a fraction of the usual cost.
Commodities offered by spread betting companies include metals (such as gold, copper and platinum), oil products (crude oil and natural gas) and soft commodities (including cocoa, sugar, cotton and orange juice). As well as giving speculators the chance to profit from their insights, spread betting on these raw materials offers producers, consumers and traders the ability to hedge against any adverse movements in underlying commodities markets.
It is important to understand the specific threats that certain raw materials are exposed to. Wheat and sugar, for example, are susceptible to adverse weather conditions and disease, while gold and oil are more easily influenced by international politics. Commodities are also often seasonal, resulting in sometimes frantic and sometimes subdued movements in the market.
It is therefore highly advisable to properly research and monitor any markets you are considering. Many spread betting companies offer research tools such as live commodities prices and charts free of charge to clients, as well as researched reports on markets and specific products.
Most companies offer risk management tools such as non-guaranteed stop and limit orders. The best providers will enable you to place controlled risk bets that impose guaranteed closing positions should the market move against you.
How can I spread bet on commodities?
Commodities available for spread betting include: gold, silver, copper, palladium, platinum, aluminium, lead, nickel, tin, zinc, crude oil, heating oil, gas oil, natural gas, no lead gasoline, Brent crude, soyabeans, sugar, wheat, corn, oats, rice, coffee, cocoa, orange juice, cotton, lumber, cattle, hogs, pork bellies and rapeseed.
Spread betting provider IG Index offers a wide range of commodities, as well as a full explanation on commodities spread betting, comprehensive research and analysis resources, risk management tools and detailed examples.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.