There are many significant benefits of investing in commodity futures trading as an investment option over other alternatives such as the savings accounts, stocks, bonds, options, real estate and collectibles.

The key attraction, obviously, is the potential for huge profits that can be earned in a short period of time. The reason why commodity futures trading can be so profitable is the factor of leverage. Take an example; say if you had a $10,000 in your futures trading account, you could deal with one S&P 500 stock index futures contract. In case you were going to purchase the same amount of common stocks, you would at present require about $350,000, which is to your surprise thirty-five times as much.

Let us suppose that you opted to enter the stock market when it was going to rise. You could start with the invest of $350,000 and make a buy of individual stocks equivalent to the account of S&P index, or you could choose to purchase S&P futures contract. Making a buy of futures contract in the form of commodity futures trading is the same as bargaining that the S&P index will hike.

Knowing the intricacies of Commodity Futures Trading

To understand commodity futures trading better let’s consider a specific example, if you had made your move on the first trading day of September, 1996 and had been in the same deal for a duration of a fortnight, the worth of your common stock position would have been around $20,000 more than when you had made the buy, which means a gain of more than five percent. Not at all a bad figure; for only a small period of two weeks. But if you had taken the futures route, you would have made the same $20,000, which would have been a 200 percent gain on the $10,000 margin provided that you dealt wisely with your commodity futures trading account. That is a real time example of the drastic profits you can reap in a short period of time with trading futures. But obviously, you can lose money in a jiffy just like you can make it fast if you trade in the wrong route.

Let’s say you believed that the stock market was about to dip down and you had eagerly sold off a futures contract instead of buying one. If you had meticulously held it for a fortnight, you would have made a loss of $20,000. That's a good illustration to prove the point that you need to withdraw from the commodity futures trading just as quickly as they start crawling against you. To state yet another benefit of futures trading; it is much lower compared to commissions. The commissions applicable on that $20,000 futures trading profit would sum nearly to $30 to $50. On the other hand the commissions on individual stocks when it comes to commodity trading are typically as much as one percent for both the buys and the sales. When the profits seem to be high in commodity futures trading, it is not really easy to make fair and right decisions about the point of buy and sale.