Commodity Trading for Beginners

Video Transcript

"This John Pinelli financial representative; going to be talking to you today about commodity trading Now commodity trading is something not typically recommended for someone who is a beginner to the investment world. Commodities are things like everything from pork bellies to corn to coal to gold and other precious metals. The way commodities work is they're typically traded in the form of futures. And what that means is that you agree to purchase this amount of this commodity, say 100 bushels of wheat, at this specified price. Now what you're betting on is you're betting that the price of that wheat will go up in the meantime. That you won't have 100 bushels of wheat delivered to your house but you in turn will be able to sell that future for more money than what you pay for it. If you've seen the movie trading spaces, they participate in commodities trading. It can be quite risky. You can make a ton of money in a single day. You can lose a tone of money in a single day. There's a lot of outside factors that can effect these commodities. For example, looking at a commodity like oranges. Suppose there's a large storm some year in Florida or a big earthquake in California and all of a sudden the orange supply has gone down a lot. That can boost the prices of oranges up. And that individual future that you hold could potentially be a very high value. On the other hand, they could make an announcement that all of a sudden there's an abundance, overabundance of oranges or somebody can say that oranges might be bad for you or the new diet anti trend. So that could drive the prices of that future down. There are a ton of outside factors that can really effect, really effect the value of those futures in commodities. So for beginners, I would not suggest looking at commodities but like I said, they can be very profitable and you can make a lot of money there. And they are typically basic items that people use and need every day. So this has been John Pinelli, financial representative, talking to you today about commodities."