The Basics of Commodities

Jeff Drobny received a bachelor’s degree in economics from Union College and an MBA from the Kellogg School of Management at Northwestern University and has been working in the financial sector for more than 20 years. Currently serving as a CIO at Black River Asset Management, Jeff Drobny expertly leverages his knowledge of commodity trading as a part of his position at the commodity-related hedge fund business.

Commodities are physical products that are traded on a qualified exchange in a similar manner to stocks. The small markets for commodity trading allow individuals to become more familiar with each commodity, making trading more profitable and effective. There are four basic sectors of commodities: grains or agricultural, which includes such items as wheat and rice; metals, including gold and silver; energy, which includes such things as crude oil; and livestock and meat.

Due to the seasonal nature of some commodities, the market is a little more predictable than the stock market. Many commodities move in predictable and relatively smooth patterns over long periods of time because they react to supply and demand along with reports about crops’ progression while in season. However, they can still be unpredictable in the short term due to how much they may be affected by sudden weather changes or events.

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