How to operate corn in the stock market?
How to operate corn on the stock market? Corn is one of the most interested and commercialized raw materials.
How to operate with corn
There are several options or products when operating with corn:
Futures: the most common way to operate with currencies is through futures contracts, and this is also the most used mode for corn. Corn futures contracts are quoted on the Chicago Mercantil Exchange (CBOT). Each one of these contracts is equivalent to 5,000 corn futures contracts and is quoted in cents per corn futures contract. The corn prices vary in movements of ¼ cents, with no limit per session. Corn futures contracts expire the business day before the fifteenth calendar day of the month and are settled by physical delivery of the raw material.
CFDs: the value of the CFD contract on raw materials, is equal to the price quoted in the currency of the commodity. Investing in a corn CFD is a more economical possibility than investing in the future, since a lower initial amount of money is required.
ETFs: Listed commodities or ETCs are similar to ETFS, with the only distinction that they replicate the performance of an underlying commodity index rather than a stock market index. ETCs are indefinite commodity-based contracts. One of the best-known ETCs in corn is the Teucrium Corn Fund ETV, which replicates the future of corn.
Options: The operation of currency options is a more advanced form of gold trading, since options can be used to perform a large number of long and medium term investment strategies; and can also be used as a hedge for short term positions.
Corn as Commodities
Corn is part of the agricultural sector, and for this reason it is classified as a grain commodity, an asset that can be obtained in numerous places on the planet.
What are CFDs? A bit of history
CFDs were created a few years ago by Hedge Funds to have access to trading operations with much leverage.
It is a product that allowed the small investor to have access later. However, in the UK, where distribution to the private client began 4-5 years ago, its popularity today is unquestioned.
This data refers to the London Stock Exchange:
The hiring of CFDs has grown 57% per year in recent years.
35% of the current total hiring on the London Stock Exchange comes from CFD contracts, with the small investor representing 20% of CFDs traded.
A CFD is a contract between two parties to exchange the difference between the purchase price and the sale price of shares or other products (raw materials, currencies, indices).
CFDs do not require the full disbursement of the nominal amount of the transaction, they work through a simple system of guarantees, which allows us to open more possibilities in our stock market operations, especially for intra-day trading.
How do they work?
The issuer of the CFDs (i.e., the financial intermediary) pays the Exchange the total value of the stock purchase and, at the same time the purchase is made, issues a CFD contract in favor of the investor. With this, he is converting the stock movement into daily settlements for differences in his account.
If the investor does not sell his CFD at the end of the session, the financial intermediary will apply an interest rate that is normally (Euribor + a differential) / 365. Since the intermediary is the one who actually owns the shares, it is a money that has fixed assets and cannot obtain any return, so for each day that the investor does not sell his CFD, this interest will be applied.
There are two types of CFD:
CFD with a commission fixed by the issuer. The issuer sets the price for buying and selling and the client must accept it if he wants to open a position. There is no market depth, just a bid price and a ask price with a differential between the two always higher than the stock market. The issuer gets its benefit from the difference between the commission price and the actual exchange price with which it can be covered instantly. The investor pays more than in the stock market if he wants to buy, and receives less if he wants to sell. In most cases, brokers who offer this type of CFDs give a misleading message that they do not charge commission. That's true, but because they benefit from execution prices.
CFD with direct market access (transparent). An operation of this type causes a real operation on the stock exchange and the depth of the market that is used to contract, is the same for stock trading, the stock exchange order book. The investor can see his orders and executions in the Exchange ticker. When entering a CFD order, it will go directly to the market on behalf of the issuer, which converts the operation into settlements for differences.