Definition of a "Commodity" Commodity Exchanges Derivatives Types of Traders in a Derivatives Market If the trader’s judgement is good, he can make more money in the futures market faster because prices tend, on average, to change more quickly than real estate or stock prices. Futures are highly leveraged investments. The trader puts up a small fraction of the value of the underlying contract as margin, yet he can ride on the full value of the contract as it moves up and down. The money he puts up is not a down payment on the underlying contract, but a performance bond. The actual value of the contract is only exchanged on those rare occasions when delivery takes place. {text:bookmark-start} {text:bookmark-end} Arbitrators :
According to dictionary definition, a person who has been officially chosen to make a decision between two people or groups who do not agree is known as Arbitrator. In commodity market Arbitrators are the person who take the advantage of a discepancy between prices in two different markets. If he finds future prices of a commodity edging out with the cash price, he will take offsetting positions in both the markets to lock in a profit. Moveover the commodity futures investor is not charged interest on the difference between margin and the full contract value. Definition of future contracts If price moves are favourable, the producer realizes the greatest return with this marketing alternative. No premium charge is ass ...