What is Commodity Spread Betting?
Spread betting on commodities is one of the most exciting forms of trading and commodity betting gets right into the nitty gritty of supply and demand economics. One of the most popular commodities is gold; and the 2008 financial crisis has made gold one of the most speculated markets in the world. Metal commodities, and gold in particular, are effectively global economic signals, but there are many different markets to bet on; some of which might surprise you.
- Lean Hogs
- Soy Bean
And loads more…
- Crude Oil
- Natural Gas
Providing there are no market shocks, most commodities tend to stay stable for long durations. However it is not rare to find soft commodities moving hugely (up to 50%) over a short just a few months.
Spread betting on commodities is very straightforward and does not differ from traditional spread trading. These markets often have very tight spreads that can begin at just 0.4 points.
Commodity Spread Betting Example
It’s January 25th 2013 and a recent swath of negative news about the Eurozone leads you to believe the gold price is going to break a record at $2,000 an ounce. The current spread sits at 1924.4/1924.8 and you decide to buy for 1924.8 at £5 per point.
In late February the Eurozone crisis worsens as expected and investors seek a safer investment by buying gold. Demand drives the price up and the new gold price nears the $2,000 milestone at 1988.2/1988.6 – skeptical of any further increase, you decide to close the trade.
Opened: 1924.8 / Closed: 1988.2 / Difference: 63.4 / Profit: £317