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Long Term Commodity Investing
Long term commodity investing can be used as a hedge against inflation, a means of balancing an investment portfolio against the slide of the dollar. The market sets the price of commodity futures based on expectation of what the spot price will be the day of contract expiration. For example, oil futures for July 2010 delivery are $76.31 a barrel for light sweet crude. December 2018 light sweet crude futures are $94.98. Despite oil selling for $150 a barrel just a year or so ago the market only expects to see oil to go up by less than 25% in eight and a half years! If you assume that the market expects to see the dollar languish a bit then the commodity market does not expect to see the price of oil go up. An excellent means of learning long term commodity investing as well as short term trading of commodities is with Commodity and Futures training.
With the use of fundamental and technical analysis traders can follow oil prices, futures prices, the fortunes of oil companies, and the rate of exchange of the dollar. Using such technical analysis tools as Candlestick pattern formations and engaging in Candlestick trading tactics it is possible to profit from trading in the short term. It is also possible to profit from long term commodity investing. In commodity investing over a longer time frame the trader may be more interested in hedging against inflation and the fall of the dollar or in betting that a sustained economic recovery will emerge and drive up the price oil futures, natural gas futures, copper futures and futures in other raw materials.
When considering long term commodity investing the trader needs to learn about which commodities are useful for long term investing. Here we are not talking about buying the commodity itself but in investing in commodity futures. One of the practical reasons for not trading commodities is lack of information. Commodity markets are largely to province of producers and buyers of commodities. Mining companies, for example, will hedge their risk by selling futures contracts. By selling contracts at slightly less than next year’s expected spot price the company will lock in part of their necessary cash flow at a reasonable price. The buyer will likewise lock in a manageable buying price. Commodities traders can profit from these actions. Oil producers, using the preceding example, are interested in having some degree of stability to the oil market. So long as they can lock in a profit on part of their production they will be pleased. If, for example, the price of oil goes up substantially these companies will still profit to a degree on the futures they have sold and more so on then current production. Long term commodity investing in oil futures, for example, could be very lucrative if the recession mends itself and the price of oil goes up. The commodity trader will have bought oil futures for delivery in 2018 at today’s low price.
2. Long term commodity investing
can be used as a hedge against
inflation, a means of balancing an
investment portfolio against the
slide of the dollar.
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3. The market sets the price of
commodity futures based on
expectation of what the spot price
will be the day of contract
expiration.
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4. For example, oil futures for July
2010 delivery are $76.31 a barrel for
light sweet crude. December 2018
light sweet crude futures are
$94.98.
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5. Despite oil selling for $150 a barrel
just a year or so ago the market
only expects to see oil to go up by
less than 25% in eight and a half
years!
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6. If you assume that the market
expects to see the dollar languish a
bit then the commodity market
does not expect to see the price of
oil go up.
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7. An excellent means of learning
long term commodity investing as
well as short term trading of
commodities is with Commodity
and Futures training.
By: www.CandleStickForums.com
8. With the use of fundamental and
technical analysis traders can
follow oil prices, futures prices, the
fortunes of oil companies, and the
rate of exchange of the dollar.
By: www.CandleStickForums.com
9. Using such technical analysis tools
as Candlestick pattern formations
and engaging in Candlestick
trading tactics it is possible to
profit from trading in the short
term. It is also possible to profit
from long term commodity
investing.
By: www.CandleStickForums.com
10. In commodity investing over a
longer time frame the trader may
be more interested in hedging
against inflation and the fall of the
dollar or in betting that a sustained
economic recovery will emerge and
drive up the price oil
futures, natural gas futures, copper
futures and futures in other raw
materials.
By: www.CandleStickForums.com
11. When considering long term
commodity investing the trader
needs to learn about which
commodities are useful for long
term investing.
By: www.CandleStickForums.com
12. Here we are not talking about
buying the commodity itself but in
investing in commodity futures.
One of the practical reasons for not
trading commodities is lack of
information. Commodity markets
are largely to province of producers
and buyers of commodities.
By: www.CandleStickForums.com
13. Mining companies, for example,
will hedge their risk by selling
futures contracts. By selling
contracts at slightly less than next
year’s expected spot price the
company will lock in part of their
necessary cash flow at a reasonable
price.
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14. The buyer will likewise lock in a
manageable buying price.
Commodities traders can profit
from these actions. Oil
producers, using the preceding
example, are interested in having
some degree of stability to the oil
market.
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15. So long as they can lock in a profit
on part of their production they
will be pleased. If, for example, the
price of oil goes up substantially
these companies will still profit to
a degree on the futures they have
sold and more so on then current
production.
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16. Long term commodity investing in
oil futures, for example, could be
very lucrative if the recession
mends itself and the price of oil
goes up.
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17. The commodity trader will have
bought oil futures for delivery in
2018 at today’s low price. He or she
will be able to cancel out the
contract by selling at new, higher
price.
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18. If, in fact, the dollar has slid in
value the trader will have
successfully hedged against the
effects of inflation and pocketed a
little extra along the way.
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19. In long term commodity
investing, fundamental commodity
analysis and the investment time
frame are important in formulating
investing goals.
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