How to invest in particular commodity, not in company?

[LindaGR]

Question:
How to invest in particular commodity, for example, oil or copper or gold, instead of investing in particular companies that operate in these comodities.

If you can give me simple to understand information I'll be very grateful because I'm a beginner

Thank you all who wishes to help me with this question!

Linda

 

[prawn_86]

Depending on how much you want to buy, but most precious metals you can buy from places like jewellers or mints. In fact im going to buy 5kg of silver tomorrow from a place here in Adelaide.

Not sure about other commodities though.

 

[LindaGR]

Re: How to invest in particular commodity, but not in physical commodity?

No, I didn't mean to buy commodities in a physical way.
My question is about investing in commodities in a way different from buying shares in relevant companies but not buying real bulk commodities, like one kilo of silver for example...

L.

 

[skc]

Question:
How to invest in particular commodity, for example, oil or copper or gold, instead of investing in particular companies that operate in these comodities.

If you can give me simple to understand information I'll be very grateful because I'm a beginner

Thank you all who wishes to help me with this question!

Linda

There are futures contracts for most commodities, although many contracts are quite large, have significant leverage (gearing) and not designed for retail traders. You may also find synthetic derivatives like CFDs which mimic the price of these future contracts, often at a lower size, but higher spread and still high leverage. IG Markets, for example, allow you to trade US light crude at minimum size of $2 per tick, compared to a full size contract which is 5 times that.

There are plenty of threads here on CFD providers. Just make sure you fully understand the risks involved with CFD before you dive head in.

If you want physical commodities then that's another story... a bit difficult to store anything other than gold and silver.

 

[gordon2007]

How does that work? I've never looked at commodities at all but could be interested. Do you actually take possession of silver or is it more like you hold a certificate instead? If you do take possession, how do you store it and would there be fees to storing it somewhere?

Do you feel like typing up a very basic structure on how it works? Or should I get up off my lazy **** and actually research it.

Depending on how much you want to buy, but most precious metals you can buy from places like jewellers or mints. In fact im going to buy 5kg of silver tomorrow from a place here in Adelaide.

Not sure about other commodities though.

 

[prawn_86]

How does that work? I've never looked at commodities at all but could be interested. Do you actually take possession of silver or is it more like you hold a certificate instead? If you do take possession, how do you store it and would there be fees to storing it somewhere?

Do you feel like typing up a very basic structure on how it works? Or should I get up off my lazy **** and actually research it.

Plenty of threads here on ASF about it. Essentially you walk into the jewellers/metal dealer here say 'i want 5 kg of silver'. They sa 'we only have 1kg in stock' so i take that and pay for it all then they call me within a week or so when the other 4 kg blocks come in Same goes for any metal.

We (old man and I) actually take possesion of it and keep it ourselves, but you can pay for storage or a safe etc. My old man lives in the country so we store it out there, its fairly safe and no-one knows about it so it would be unlucky to have it stolen.

 

[Wysiwyg]

Plenty of threads here on ASF about it. Essentially you walk into the jewellers/metal dealer here say 'i want 5 kg of silver'. They sa 'we only have 1kg in stock' so i take that and pay for it all then they call me within a week or so when the other 4 kg blocks come in Same goes for any metal.

Ainslie are selling silver at AUD$653 per kilogram. Good price or not?

 

[prawn_86]

Ainslie are selling silver at AUD$653 per kilogram. Good price or not?

Im no expert, we are just buying some for an ultimate if the world goes to **** hedge. If not we have a few nice paperweights

But im getting it for $648 per kg, so about the same

 

[GMS]

Linda,

As mentioned above, there are futures (exchange traded) and CFD (over the counter) contracts available for Traders.

The futures are larger face value contracts compared to the CFD contracts. Both are suitable for retail Traders/Investors, although each individual will need to assess the suitability for their goals.

Some points to note, if you hold a futures contract and it comes up for expiry, you will have to roll the contract forward to maintain your position, and you will realise the profit/loss of the contract you close.

With the commodity CFDs you pay/receive overnight interest depending on your position in the market. If you hold the position overnight or for any length of time you will need to factor in the additional interest charge/receipt to your overall returns.

All the best.

 

[Ageo]

Ainslie are selling silver at AUD$653 per kilogram. Good price or not?

When you buy silver or any other precious metal infact its not so much the price you buy it (few dollars up or down isnt going to make a difference) its more of the fact when in the market you buy and what the main reason your buying is for.

10%-20% of your portfolio should go towards slowly acquiring a mixed set of previous metals (but mainly consisting of gold and silver). That way like prawn said incase of something crazy happens you have a nice hedge.

 

[Temjin]

Here are your answers.

http://etfsecurities.com/en/securities/etfs_securities.asp

You can buy ETCs (Exchanged Traded Commodities) through the London Stock Exchange via Interactivebrokers.

(Note these shares are dominated in USD. Therefore, you may need to hedge against currency movement. It adds a little bit of complexity over it.)

You can practically buy long or sell short any commodities that are available on the futures market on a non-leveraged basis. (or on 2x or 3x basis)

Your other options, as others have suggested, are obviously the future markets and/or CFDs but you would be playing with high leverage unless your investment capital is sufficiently large enough.

Note, there are risks associated with buying ETCs. You should read through the disclosure FAQs from their website before making any decision. (or seek an investment advisor, though you will have trouble finding any one who will know anything about it)

 

[Nyden]

Another option : http://www.asx.com.au/products/etfs_etcs/types/commodity_etcs.htm

Not sure as to how liquid they are, though. Especially since they're hard commodities ... oh, even I didn't find that funny

 

[Bemac]

Question:
How to invest in particular commodity....

If you can give me simple to understand information I'll be very grateful because I'm a beginner

Thank you all who wishes to help me with this question!

Linda

First post & I already feel like I'm intruding...

I tried the simple way {google} to find what I wanted to say but couldn't find the text I was looking for so the following is abridged & paraphrased.


The Origins of Commodity Futures.

Way back when... when the Japanese Emporer employed Warlords, they were paid in Rice.
Warlords needed Armour and would Promise the Armourer (or any other retailer) Full Payment when the Crop came in {in the Future}. The Amount of Rice to be Paid was determined at the Time of Sale.
A poor Crop & the Armourer was way ahead as his bushels of Rice would be more valuable as compared to if it were a bumper Crop.

Now that we are Global, we have Rice Deliveries every 2nd Month {January, March, May, through November} but Traded right up until Last Notice before Delivery {Last Notice is usually 2 weeks before Contract Maturity &, before they fixed it so that Brokers were Mandated to Close All Spec Traders Positions, that's where the horror stories of 200,000 lbs of Rice being dumped on someones front yard.}

Spot vs Future.
Orange Juice.
A Florida Frost in March means Expensive Frozen Orange Juice Concentrate in June. The Effect is Immediate on the Boards but Delayed at SuperStore or WalMart or wherever you buy your FOJ.

All seems too volitile for a greenhorn but there's more.

Options
Let's add "Options" to the equation.
Wth is an option?
As a Spec, that's when I'm not positive I have picked the right direction for the Commodity but don't want to miss the boat. My choices are wide and varied BUT,
The Main thing an Option does is absolutely Limit My Risk whilst leaving My Potential Profit Wide Open.


Comm 'A' currently at 1.2500 & my research suggests 1.5000 but if that doesn't happen it could fall to 1.0000.
This prevents me from playing Futures but not "Options On Futures".

Phone call to Broker...
Buy 1 "xyz Commodity" CALL"@ Strike 1.5000 or Better.
(Broker does the calculation {which you should have done beforehand} and tells you that you're expenditure is $ xxx.xx).
That's Your Total Risk No Matter What Happens.

Buy 1 "xyz Commodity"Put" @ Strike 1.0250 or Better.
(Broker does the calculation and tells you that you're expenditure is $ xxx.xx).
That's Your Total Risk No Matter What Happens.

If this is confusing, you need to add a little research on Commodity Trading or buy a new pair of shorts 'cause your about to lose yours.

Sorry but, I call 'em as I see 'em.

BMc