Financial Spread Bet on Commodities
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Financial spread betting companies provide investors an opportunity to deal in the financial markets without actually owning the instrument in question. That is to say, an investor or trader can speculate on many financial instruments such shares, commodities, forex and indices without having to own the shares, currency etc.
Financial spread betting is increasing in popularity. One reason for this is the absence of taxation!*. There is no capital gains tax on profits and no stamp duty on transactions. However, when a spread trade goes wrong then you can lose more than your original investment. Any losses incurred through a financial spread bet cannot be used against any capital gains that are made on ordinary investments.
Spread bet on commodities / spread trading on commodities depends on variety of factors. If trading on “softs” such as corn or wheat then large influences can be low yielding harvests / bad weather.
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If you’re trading on Nymex Crude Oil or Brent Crude Oil then you need to consider the key supply and demand elements. Recently:
- Fears over increasing demand from India and China push the prices up (June 07)
- Concerns over supply and OPEC’s operating levels pushed the prices up (July 07)
- OPEC releasing a statement saying it was planning the highest ever level of oil exploration, pushed the price down (July 07)
- A possible downturn in the US economy (the US is the number one oil consumer) pushed the prices down (Aug 07)
- Two storms in Gulf of Mexico threatened supply problems. The Gulf accounts for 30% of US oil production and the majority of its refinery capacity. Naturally that threat to supply pushed the price up. (Aug 07)
Such conditions help to make volatile markets on which you can profits from by Buying and Selling commodities.
Originally the commodities market was based purely on agricultural commodities (softs), where producers / farmers and traders would set prices on the future value of the crops.
Similar principles are followed in both financial spread betting on commodities and the finance markets. The key difference is that in the latter one, no conventional quarterly cycle is followed.
Another difference is the presence of ‘new crop’ or ‘old crop’ in commodity softs spread betting, there are often two distinct markets present. The present crop and following year’s crop. In such cases, there is a possibility that prices and volatility will differ significantly.
For more information on financial spread trading, FTSE spread betting, Financial Spreads and spread trading companies, log on to the website CleanFinancial.com. A handy website for getting information on commodity bets and a range of examples on how to spreadtrade commodities such as Brent Crude Oil
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Tight Spreads, No Commissions, No Fees. Trade
1000s of Equities, Indices, Forex and Commodities markets.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Financial Spread Bet on Commodities' by KK, updated 23-Aug-07
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