How is the concept of time important to commodities trading?
What will be an ideal response?
Answer: Commodities trading is very future-oriented. Futures contracts are a main element of this process. In these contracts, the trader agrees to buy a specific amount of a commodity at a certain price at a certain date. The trader bets that the contracted future purchase price will offer a financial benefit compared to the market price for the commodity at that time.
Explanation: Commodities traders try to look forward in time and judge what market prices will be for a commodity. They draw up futures contracts agreeing to buy a specific amount of a commodity at a specific date and price. If the contracted price they pay is lower than market price, they reap savings or can sell the commodity at the higher price and make a profit. If the market price is lower, they are buying the commodity at a higher contracted price, taking a loss.
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