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Commodity Futures

Definition of Commodity Futures

A commodity futures is a contract between two parties to buy or sell an underlying commodity like gold, silver, corn, and others are a pre-determined price and date.

A commodity futures contract is an obligation that’s entered into not just by retail traders but also companies who want to lock in a favorable price. This is the place to understand all about futures contracts in trading.

Related Terms

Assets

An asset is anything that has economic value and is owned by an individual, company, or group. Assets are bought to generate returns in the future.

Carrying Charge

Carrying charge or cost of carry is the money involved in the upkeep or general holding of an asset or financial instrument. Examples of carrying charges include maintenance costs, insurance, and others.

A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.

Insider Trading

Insider trading refers to the often illegal act of trading shares based on information that is not publicly available, typically obtained through dubious sources.

This privileged access to confidential information is termed “insider trading” because information is generally sourced through insiders or employees working at a publicly traded firm.

Cash Flow Statement

A cash flow statement is used to present the amount of money that has been earned and spent by a business over a specific period of time. There are three sections or parts to a cash flow statement:

  • Operating Activities: cash flows from the core activities of a business that generate income as well as cash equivalents (current assets & liabilities)
  • Investing Activities: cash flows from investments or sales of long term assets
  • Financing Activities: an action or activity that brings a change in a business’ equity capital and/or borrowings

Capital Gain Or Loss

A capital gain is a profit that an investor or trader earns by selling an asset while a capital loss is the money a trader or investor loses after selling an asset. Capital gains are taxed while capital losses can be used to offset gains.

Equities

The term equities can be used to describe two different things. First, equities refers to stocks held by shareholders. Equities of this type represent residual ownership or stake in a company.

Second, equities are the amount of money shareholders shall receive in the event that a company is liquidated. In such a case, the equities will be calculated by subtracting the total debt from total assets.



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