Course Overview: Fundamentals of Commodities

Course Description: This course offers an in-depth exploration of commodities and their trading mechanisms. It delves into essential aspects such as definitions, key market players, trading strategies, and the unique characteristics of various commodity categories. The course is tailored for those keen on understanding the commodities market, including hedgers, arbitrageurs, speculators, and other market participants.

Course Objectives: By the end of this course, participants will be able to:

• Define and describe the key features of commodities.
• Identify and categorize the main types of commodities.
• Analyze the factors influencing different commodity categories.
• Implement trading strategies for commodities using futures and options.
• Understand and apply commodity spreads and spread trading strategies.

Course Modules:

Module 1: Introduction to Commodities

• Definition and Core Characteristics of Commodities
• Types of Commodities:
  • Grains and Oilseeds
  • Softs
  • Livestock
  • Base/Industrial Metals
  • Precious Metals
  • Energy
• Costs Associated with Owning Physical Commodities

Module 2: Commodity Derivatives Market

• Market Participants: Hedgers, Arbitrageurs, Speculators
• Comparison of Spot Market and Derivatives Market
• Overview of Trading Instruments: Futures and Options

Module 3: Commodity Trading Strategies

• Hedging, Arbitrage, Trading, Spread Trading Techniques
• Case Studies: Utilizing Futures and Options for Hedging
• Spread Trading Strategies

Module 4: Major Commodity Categories

• Comprehensive Review of Each Category:
  • Grains and Oilseeds (Corn, Wheat, Rough Rice, Oats, Canola, Palm Oil, Soybeans)
  • Soft Commodities (Lumber, Sugar, Cotton, Coffee, Cocoa, Orange Juice)
  • Livestock (Beef, Pork)
  • Energy (Crude Oil, Natural Gas, Electricity, Gasoline, Diesel)
  • Base Metals (Steel, Copper, Aluminum, Lead, Nickel, Tin)
  • Precious Metals (Gold, Silver, Platinum, Palladium)

Module 5: Market Dynamics and Influencers

• Key Drivers for Different Commodity Categories:
  • Government Reports
  • Weather and Seasonality
  • Economic Growth and Activity
  • Political Instability
  • Production Constraints
• Historical Development of Commodity Trading

Module 6: Futures and Options Contracts

• Detailed Understanding of Futures Contracts:
  • Contract Size, Tick Size, Pricing
  • Long and Short Positions
  • Open Interest and Bid/Ask Spread
• Comprehensive Guide to Options Contracts:
  • Call and Put Options
  • Strike Price and Premium
  • In-the-Money, At-the-Money, Out-of-the-Money

Module 7: Commodity Spreads and Strips

• Exploring Different Types of Spreads:
  • Intramarket/Calendar Spreads
  • Intermarket Spreads (Crush Spread, Energy Spreads)
  • Crack, Spark, and Frac Spreads
• Understanding Futures Strip Trades:
  • Securing Average Prices

Module 8: Case Studies and Practical Applications

• Practical Examples of Hedging with Futures Contracts
• Various Scenarios in Options Case Studies
• Examples of Cash and Carry Arbitrage
• Monthly Rolls for Futures Contracts

Assessment: Participants will be evaluated through a mix of quizzes, case study analyses, and a final exam to assess their comprehension and application of the course content.

Recommended Prerequisites: No prior knowledge of commodities is required, though a basic understanding of financial markets and instruments is recommended.

Target Audience: This course is ideal for financial analysts, traders, investors, risk managers, and anyone looking to build a strong foundation in commodities trading