Compare Commodity Derivatives and Securities

Kiến thức tham khảo khác
09/12/2022

What are securities?

Securities are proof of legal ownership of the assets or shares of the issued company. Securities can take the form of certificates, journal entries or electronic data. Types of securities include: stocks, bonds, fund certificates…

What is Commodity Derivatives?

Commodity derivatives are also known as futures trading of commodities. Trade at a specified price. The two parties will determine the terms including price, future delivery time, nominal amount, time and obligations of both parties. Currently, commodity derivatives trading includes 4 commodity groups: Agricultural products, Industrial raw materials, Metals and Energy. In which, the group of agricultural products accounted for the largest proportion.

Advantages and disadvantages of Securities and commodity derivatives:

SecuritiesCommodity Derivatives
How to tradeOne-way transaction. You buy shares of a company, wait for the stock to increase in value, then sell and make a profit.Transactions are two-way:
You buy goods and wait for the price to increase and then sell for a profit. Or when you see that the price of an item is trending down, you can enter a sell order and wait when the price is lower, then close the order (or take profit).
Market transparencyDomestic transactions, the capitalization level is not high, so it is still likely to be dominated by individuals and organizations.International transactions with capitalization up to billions of dollars, so manipulation is almost non-existent.
CreditialCurrently, the liquidity is already high due to the participation of many new investors. However, liquidity still focused on top stocks, blue chips.High liquidity for all commodities.
Analytical abilitySkill in financial analysis or technical analysis is required to choose when to tradePrices fluctuate according to market demand, so it can be analyzed based on the world’s economic – political – social situation.
Calculate riskHigher risk due to T+3 transactions, so it is not possible to stop loss immediately after entering the wrong order.Able to manage risk when strictly following trading principles
ProfitabilityStock values are affected by speculators’ psychology, so there are fluctuations that are difficult to control. It takes a lot of trading experience to be profitable.Price indexes increase and decrease according to world demand, so prices often follow trends and investors can make profits when trading in the right direction.
How to calculate profit?You buy shares of a company, the stock price goes up and you make a profit.You can make profits on both rising and falling prices
Margin Deposit 1:1.Margin ratio by commodity type, usually ranges from 1:10 to 1:30.
Waiting timeTrading T+2.5, it will take 3 days from the time of purchase for the stock to return to your account, so there is a risk that if you just bought a stock but the price drops, you will not be able to cut your loss in time.Trading T+0 should be able to be proactive in risk management and avoid large losses.

Securities and the commodity market each have their own particularities, characteristics and investment conditions. From the market point of view, investors should have a balanced approach to choose the right investment channel depending on the time to optimize the capital source to bring the best return for themselves.

And although appearing in Vietnam since 2018, investors are still cautious about the Commodity Derivatives market. But with hundreds of years old and the leading value financial market in the world, this is considered a new gold mine for investors in Vietnam. And when Vietnam’s economy opens for integration, this is also an inevitable trend.

Before deciding to invest, AXC encourages you to sign up for a demo account (trial trading account) to understand the market and how to trade. You can see the article “How to open a CQG demo account” or leave your information here, we will create an account and send it to you.

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