Commodity futures are futures markets where the underlying commodity is actually a commodity, such as metals like gold and silver, and agricultural products like corn and wheat. Futures based upon commodities are the primary way of trading commodities. Commodity futures are essentially the same as all other futures markets (index, and currency futures markets), and are traded in exactly the same way.
Settlement and Delivery
As commodity futures are based upon actual physical items, they are usually settled by delivery of the underlying commodity, rather than in cash. This means that if a trader is holding a futures contract when it expires, the appropriate payment will be made by the buyer, and the underlying commodity will be delivered by the seller.
Futures contracts for commodity futures specify the type and quality of the underlying commodity that must be delivered upon settlement. For example, the ZG futures market specifies that the seller must deliver 100 troy ounces (±5%) of refined gold, of at least .995 fineness, cast as either one bar, or three one kilogram bars.
Popular Commodity Futures
Some of the most popular futures markets are those that are based upon commodities, including the following markets :
Metal Futures- ZG - The Gold 100 troy ounce futures of ECBOT (Chicago Board of Trade)
- ZI - The Silver 5000 ounce futures of ECBOT (Chicago Board of Trade)
- ZC - The Corn futures of ECBOT (Chicago Board of Trade)
- ZW - The Wheat futures of ECBOT (Chicago Board of Trade)
- ZO - The Oats futures of ECBOT (Chicago Board of Trade)
Market Profiles
Complete descriptions of many of the above commodity futures, including the commodity that the market is based upon, the futures contract specifications, and the market holidays, are available in the market profiles.
