The Differences of Options Commodities Trading and Margins Commodities Trading
There are two kinds of commodities trading contracts that are options contract and margins contract. Whether you are new trader in commodities trading or a professional trader, you need to understand the commodities contract comprehensively. Bad knowledge of these contracts can make the trading result in overwhelming losses.
Talking about commodities trading, many stocks holders have misunderstanding that they are investing in commodities futures. Commodities’ investing involves entering a contract to purchase bulk raw materials at a specified price to be delivered on a future date certain. The seller is hoping to secure a stable price for goods while the buyer is seeking to either lock in commodities needed at a particular price or speculating that the cash or spot price will rise on or before the settlement date and the goods can be sold for a nice profit. It is for this latter reason that most commodities contracts are bought and sold many times and the buyers will seldom take possession of the commodities.
Options commodities trading contract almost similar with margins commodities trading contract. In an options contract, the buyer agrees to buy commodities at a set price on a date certain in the future. But, the buyer is under no obligation to accept delivery of the underlying commodities. If the value goes up, the buyer sells the option contract. If the values start to go down, the buyer can sell the contract and attempt to get back some of the money rewarded for the option. Or, the buyer can just walk away in which case all that is lost the fee is paid for the option. One of the great advantages of this commodities trading contract is that a huge number of goods can be organized for a little cost.
The margins commodities trading contract is similar with one main difference. The buyer is under an obligation to accept delivery of the goods so that in the event of falling prices, the buyer will have to sell the contract and pay the original seller the difference in the amount received and what was promised. But, under a margin contract, the stocks holder could lose much of funds very quickly, even though the trader could also generate a lot of money just as quickly.
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