What Is A Commodity?

A commodity is any good that is identical (or very similar) from any producer, i.e. producers have to compete on price. They are usually used in production of other goods or services.

The most common types of commodity traded on financial markets are:

  • Oil
  • Wheat
  • Copper
  • Iron

Commodities are very susceptible to speculation and therefore are frequently volatile. The quantity of a commodity traded is standardized by the Chicago Board of Trade through contract amounts (i.e. one wheat contract is 5,000 bushels).

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