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EssentialInvestor Tutorials

Commodities -- Relative Liquidity

Featuring Jamie McDonald

Feb 07, 2022 • 21 minutes

79

3

Essential

Investor Tutorials

Commodities -- Relative Liquidity

It's critical to think in terms of contracts and exchanges when trading commodities.

Featuring Jamie McDonald

Feb 07, 2022 • 21 minutes

Jamie McDonald breaks down relative liquidity in commodity markets by explaining which commodities trade the highest volume and carry the biggest weighting in commodities indexes. Much like equities, commodities trade across a number of global exchanges. But, unlike a share in a company, a commodity contract is not fungible across exchanges. That’s why it’s important to think in terms of contracts and exchanges as well as individual commodities to determine relative importance in a global ecosystem. McDonald notes the dominance of energy commodities, particularly crude oil, and discusses the surprisingly high weighting of agricultural commodities despite their relatively low volume at the individual contract level. And he details how certain contracts on international exchanges, like those in China, can be useful indicators of global growth even if they aren’t considered benchmarks. Show More

Investor Tutorials is designed to help investors better understand critical market, financial, business, and economic concepts. From the largely unknown to the chronically misunderstood, we focus on ideas the mastery of which will add serious value to investors' decision-making process.

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Investor Tutorials is designed to help investors better understand critical market, financial, business, and economic concepts. From the largely unknown to the chronically misunderstood, we focus on ideas the mastery of which will add serious value to investors' decision-making process.

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