A commodity is a physical substance (food, grains, or metals, for example), which investors buy or sell, usually through futures and options contracts. Foreign currencies and financial instruments (including stocks, bonds and indexes) are also traded on commodities exchanges using options and futures contracts.
Futures contracts give holders the right and obligation to conduct a specified transaction at a future date and a predetermined price. These contracts are standardized, regulated by an agency and guaranteed by a clearinghouse. Some futures contracts are settled by the physical delivery of goods, others are settled in cash.
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