Phil.. I dont have much time so ill explain more later in depoth or maybe Lee can do the honours.. but the process of trading commodities is also known as futures trading. Unlike other kinds of investments, such as stocks and bonds, when you trade futures, you do not actually buy anything or own anything. You are speculating on the future direction of the price in the commodity you are trading. This is like a bet on future price direction. The terms "buy" and "sell" merely indicate the direction you expect future prices will take.
If, for instance, you were speculating in oil (mobil 1 or Castrol.. no rows on here please you would buy a futures contract if you thought the price would be going up in the future. You would sell a futures contract if you thought the price would go down. For every trade, there is always a buyer and a seller. Neither person has to own any oil to participate. He must only deposit sufficient capital with a broker firm to insure that he will be able to pay the losses if his trades lose money.
that is only very brief.. just dont have the time yet mate
Dave/Porkie, I have dabbled (fairly heavily in shares last year - and actually did OK - although it was a bit nerve racking sometimes...!!
)
Is this similar to what you guys call spread betting as I looked at this last year but never did anything about it..?
From what I could work out, there was no tax paid on any profits made as you didn't "actually" buy anything, you just expressed an interest in buying them and if they went up
.....if that make any sense..?
