A commodity Trader will trade positions for their own account. These positions are normally opened and close within a given trading session. Commodity futures trading offers an exciting market to invest in or work for as a broker.

A trader works on the floor of a futures exchange. Traders can trade for others, but normally trade for their own accounts. A commodity day trader will open and close positions daily.

Options should be used instead of outright futures contracts whenever the trader can realize a “trading edge” or advantage. They are advantageous whenever they offer a higher mathematical probability of profit; less risk of sudden, unpredictable, adverse market moves; a better risk/reward ratio; and/or increased trading opportunities.

Higher Probability of Profit: Through the proper use of option premiums, positions can be constructed that offer a high probability of profit. For example, selling an out-of-the-money, overvalued call on an overvalued, overbought commodity, or buying an at-the-money put in the same situation. A simple method of detecting an undervalued option is to compare current volatility to past readings. This can determine whether the volatility is at the high or low end of its range, commonly referred to as “theoretically under- or overvalued.”

A commodites floor broker works for a firm that trades on the exchange. Normally floor brokers are executing customer orders and not trading for their own account.

Futures and Commodity Exchange

Exchanges where commodities and futures trade include: Chicago Board of Trade, Chicago Mercantile Exchange and the New York Mercantile Exchange.

Futures Introduction Books

Commodity Futures and Options

Futures 101 : An Introduction to Commodity Trading (2000 Edition)

A Complete Guide to the Futures Markets : Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options

American Investment Training - Futures and Commodities Broker License