For multiple centuries, commodities have been traded across the globe by merchants and institutional investors as a matter of business.  More recently, for retail investors looking to diversify beyond traditional equities and fixed income, commodities represent a separate asset class that complements existing portfolios.  Many well-diversified investment portfolios utilize allocations to precious metals, energy, currencies and other commodity classes as a means of enhancing returns and/or reducing overall portfolio risk.

Commodities represent a "pure play” on asset prices not tied to earnings expectations or price ratios.  Price discovery and trading takes place on large, well-established international exchanges including Chicago Mercantile Exchange (CME), International Commodities Exchange (ICE) and London Metal Exchange (LME).  

Futures and options on futures allow investors to take advantage of commodity price moves – either higher or lower – with numerous trading strategies available depending upon an investor’s forecasts on market direction, size of price movements and tolerance for risk.

We are very active in a broad range of commodity markets including:

  • Currencies - $Cdn, Euro, British Pound, Japanese Yen, Swiss Franc, US Dollar index

  • Precious and Base Metals - Gold, Silver, Copper, Platinum, Paladium, Aluminum, Tin

  • Energy Complex – Crude Oil, Natural Gas, Heating Oil, Gasoline, Crack Spreads

  • Stock Market Indicies - DJIA, S&P, NASDAQ, Russell

  • Interest-rate Financials  – 30 year bonds, 10-year notes

  • Agriculture – Corn, Wheat, Soy Complex, Board Crush, Oats, Canola

  • Softs – Coffee, Cocoa, Sugar, Orange Juice, Cotton, Lumber

  • Meats – Hogs, Cattle.

Find out how commodity trading using futures and options on futures can augment your current investment strategy.

 


 

Price Risk Management / Hedging

Significant, sometimes abrupt, changes in supply, demand and pricing have affected many of the world’s commodity and currency markets over several decades.  Often these price changes can create risk management challenges for business sensitive to commodity price changes, currency exchange rates and/or other key elements.  

For at least two hundred years, agricultural businesses have utilized commodity futures and/or options on futures to offset the risk of adverse price movements and effectively manage these exposures.

Our team works with agricultural businesses including:

  • cash grain producers

  • feed manufacturers

  • grain elevators

  • dairy / beef / hog farmers

  • oilseed crushers

To understand specific areas of financial risk and develops custom solutions using futures and options on futures on the Chicago Mercantile Exchange, Winnipeg Commodities Exchange, Kansas City Board of Trade and Minneapolis Grain Exchange to reduce and/or eliminate agricultural commodity price risk.

To obtain case studies that provide practical examples of how these tools work for agricultural business click here.


 

Trading / Speculating

Many investors believe that the price of a certain commodity will rise or fall dramatically and wish to take advantage of that conviction to speculate for financial gain.  Speculation involves a future focus, the formulation of expectations and the willingness to take positions in order to profit.  Speculators bet on the price direction of a market and take positions accordingly in order to profit from a certain predicted movement of that market. 

Quite often futures and options on futures make speculating easier since transactions are fast and low cost.  In addition, futures and options on futures can provide the necessary leverage for some investors to carry out a speculative position since small (sometimes zero) initial investments are generally required.

It is well accepted that risk and reward go hand in hand.  Higher expected returns have to be generated by taking on more risk.  Speculators using commodity futures and options on futures usually take on more risk because they are in the financial position to do so and want to generate higher returns.

Many of our commodity trading clients have their own ideas on the market and work with us to construct trades based on their forecasts.  In addition, we can draw on several well-regarded commodity research teams including Hightower, ADM and RBC Capital Markets to provide our clients with comprehensive market analysis and trading ideas.  We also frequently publish a market newsletter which also offers speculators periodic trading recommendations.

We work closely with clients who are trading commodities for the first time to ensure trading tools and a client’s tolerance for risk is well understood.  Many of our clients have been with us for many years and count on our outstanding levels of trade execution, service and risk management.