With appliances, electronics, and jewelry relying on these precious metals, their value can fluctuate and vary greatly from one metal to the next on a daily basis. The three most commonly-traded metals include gold, silver, and palladium, but their values and why investors seek each metal varies greatly.
With palladium a critical component in automobiles while also being harder to find than gold, it has a high demand for investors interested in commodity trading. With the price of the rare metal changing based on demand, political tensions, and knockoffs, trading palladium can be extremely volatile.
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HOW TO DO IT
When investing and trading energy commodities, participants have multiple trading methods to find opportunities:
While ETFs denote a claim to a commodity that is traded on an exchange, ETNs operate more like bonds in that they are less secure. Returns from ETFs are generally derived from interest and ETNs’ profits are classified as capital gains.
Buying and selling commodity on a future date at a predetermined price is the basis of a futures contract. The buyer has the obligation to purchase the asset when the futures contract expires, while the seller provides the commodity once the contract expires.
By having the right but not the obligation to buy or sell contracts, options contract trading allows investors to buy (call option) or sell (put option) the asset or commodity at a set price, time or date.