Why commodities are being traded on Stock Market?

 
 

Commodities are often traded on stock markets because they provide investors with an opportunity to gain exposure to the prices of raw materials and natural resources, such as oil, gold, or agricultural products. Commodity prices can be affected by a variety of factors, such as supply and demand, geopolitical events, and weather conditions, making them a useful tool for diversifying an investment portfolio.

Trading commodities on stock markets allows investors to buy and sell contracts for commodities, rather than the physical commodities themselves. This is known as futures trading and it is done through commodity exchanges such as the Chicago Mercantile Exchange (CME) and the New York Mercantile Exchange (NYMEX). Futures contracts are agreements to buy or sell a specific commodity at a specified price and date in the future.

Another way to invest in commodities is through exchange-traded funds (ETFs) and exchange-traded notes (ETNs) which are securities that track the performance of a commodity index or a basket of commodities. These securities can be bought and sold on stock exchanges like stocks, and they provide investors with a convenient and relatively low-cost way to gain exposure to commodity prices.

In summary, trading commodities on stock markets allows investors to gain exposure to the prices of raw materials and natural resources through futures trading and securities like ETFs and ETNs. This allows investors to diversify their portfolio and benefit from changes in commodity prices.