123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Investing---Finance >> View Article

Minimize Risk And Maximize Tax Benefits With Commodity Trading

By Author: Rogers Eric
Total Articles: 3

Trading and investment are seen as lucrative ways to earn money and enhance monetary wealth in the long run. Different ways of trading and investing offer varied levels of risk and return. Generally, higher the risk, greater is the return on investment and vice-versa. Many people are risk averse while some others may be willing to take much more risk in order to yield higher returns. One of the most popular investment options is commodity trading which entails the buying and selling of commodity in an international market also known as a commodity market. In this market, trade is conducted on primary goods such as wheat, coffee, and sugar, to name a few examples. There are two types of trading in the commodity market, the first is physical trading and the second is based on future contracts. Future contracts include options trading. An option is a contract in which a buyer gives the right to buy or sell an underlying asset or instrument at a specified price on or before a specified date.

If the buyer exercises the option, he or she can sell that right to another seller at a premium. A premium denotes the price of purchasing the option or contract. There is no obligation placed on the seller or buyer to sell or buy the option. Unlike stock trading, wherein the seller must sell the trade, in commodity trading there is no obligation. In fact, the contract can remain unused until it is expired in case an option holder does not wish to sell it to anyone. This minimizes risk to a significant extent, provides leverage and even insurance. An option seller is also commonly known as the writer of the option. It is imperative to understand that when you purchase or sell option you are not actually purchasing or selling any assets. The contract only highlights the agreement to buy or sell the asset. The actual value of the option lies in the value of the underlying asset or instrument.

Another advantage of such type of trading is that a seller need not sell the option till he or she is comfortable in doing so. The option holder can analyze the market, assess the risk, understand the direction the market is heading toward and then only sell the option at the right time. Due to this unique non-obligation feature, risk is minimized but profit is still unlimited. This international market also makes it easy to trade in different countries. You can easily trade options in Costa Rica, for example, and spread risk across various countries. However, as fruitful as this type of investing sounds, it is essential to engage professionals in order to maximize benefits of trading in international markets. Many trading companies pay top dollar in order to research and understand where the market is heading. These experts know where profits can be earned, what options yield highest return on investment and the suitable time to buy or sell options. You can easily find such companies online and many of them specialize in trading in Costa Rica.

Total Views: 148Word Count: 511See All articles From Author

Investing / Finance Articles

1. Let The Advisor Manage Your Finances
Author: Daniel Stewart

2. Pension Plan For Life Long Financial Stability
Author: Daniel Stewart

3. Follow These Tips Before Applying For Small Business Loans
Author: Secured Lending

4. Data Security In Tally.erp 9
Author: Riyaz Tamboli

5. Points To Check Before You File Your Income Tax Returns
Author: RNS Associates

6. How To Withdraw Money From Mutual Funds?
Author: Shashank Pawar

7. Fixing Credit To Buy A House With Credit Repair Specialist
Author: Martin King

8. What Is Atal Pension Yojana?
Author: Neha Sharma

9. How To Take A Loan On Credit Card?
Author: Neha Sharma

10. Life Insurance: Types, Benefits And Features
Author: Neha Sharma

11. How To Apply For A Business Loan In India
Author: Neha Sharma

12. What Is A Forex Card?
Author: Neha Sharma

13. What Is An Education Loan?
Author: Neha Sharma

14. Fixed Deposit: Top 5 Reasons To Open A Fixed Deposit Now
Author: Neha Sharma

15. What Are The Benefits Of Current Account?
Author: Neha Sharma

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: