What Are The Main Advantages Of The US Commodity Futures Market Over The Stock Market?

The main advantage is in the leverage that's possible. Whereas you may have to spend £200,000 to purchase the equivalent in stock, in the commodity futures market, a margin deposit, a small percentage of the actual cost, can by comparison lever vastly greater amounts of commodities.

By now, you will probably be thinking that commodity futures trading is a risky business. And you'd be right. For relatively small sums of money, handsome profits can be made. But it has to be borne in mind that leverage works both ways, producing losses as well as gains.

However, as with all other financial markets the underlying principle remains the same: buy low and sell high. The difference with commodity futures is that you are not buying or selling anything tangible. Your interest is merely as a speculator who is taking a position on buying and selling with the expectation of profiting from rising or falling prices. The thousands of tons of wheat you buy or sell is only on paper, a contract to do so at a future date. From the outset, the intention is to both buy and sell before the contract date arrives.