futures and the options topics in this book will get you familiar with
many of these concepts and accelerate your climb up the learning curve.
In our lives there are certain products that we use everyday or at least
most days. Let's consider a typical day in the life of a typical person. She
may have breakfast consisting of cereal, bacon, and orange juice. Then
her car, built mainly from metals, would require gas to get her to work.
She may use a computer at work, and some of its components use
metals such as copper and gold (in its chips). Her house, built from
lumber, may use heating oil for warmth during winter. She may have a
few cups of coffee with sugar during the day, and may have bread with
her lunch and dinner.Her clothes and bed sheets are mainly made from
Most of us have a lot in common with the person just described.
That is because there are certain materials all of us use in our lives,
without which we cannot imagine living. Meats, oil, metals, and grains
are all examples of raw materials used widely by our society, and they
are known as commodities. Our everyday dependence on commodities
assures that large volumes of these materials are bought and sold to
satisfy the market demand. For example, oil (petroleum) is one such
commodity that is consumed in large quantities everyday. From
automobiles to airplanes to power generation facilities to the
transportation industry, oil is the lifeblood of our society. Not to
mention that heating oil, plastics, fabrics, and numerous other products
we use everyday are also derived from oil.
Dealing in commodities has become a lucrative practice for many
who profit from the sheer volume and price volatility associated with
them. They are commodity traders who practice the old rule of buy low …