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Characteristics of commodities

First, the price fluctuates greatly. Only when commodity prices fluctuate greatly, traders who intend to avoid price risks need to use forward prices to determine the price first. For example, some commodities implement monopoly prices or planned prices, and the prices remain basically unchanged. There is no need for commodity operators to use futures trading to avoid price risks or lock in costs.

Second, supply and demand are large. The functioning of the futures market is predicated on extensive participation in transactions by both supply and demand parties of commodities. Only commodities with large spot supply and demand can fully compete on a large scale and form authoritative prices.

Third, it is easy to classify and standardize. The futures contract stipulates the quality standards of the delivered commodities in advance. Therefore, the futures varieties must be commodities of stable quality, otherwise, it will be difficult to standardize.

Fourth, it is easy to store and transport. Commodity futures are generally commodities for forward delivery, which requires these commodities to be easy to store, not easy to deteriorate, and easy to transport to ensure the smooth progress of physical delivery of futures.

Bulk commodities have 5 characteristics at the same time:

1. Large supply and demand

2. Origin

3. Raw materials

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4. National unified price limit

5. Impact on national economy and people’s livelihood